Tag Archive | "Balyasny Asset Management"

Michael Milken, 60,000 Deaths, and the Story of Dendreon (Chapter 15 of 15)

Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

Michael Milken, 60,000 Deaths, and the Story of Dendreon (Chapter 15 of 15)



What follows is PART 15 of a 15-PART series. Soon, we will publish the full 15-part story as a single document.

Click here to read PART 1

Click here to read PART 2

Click here to read PART 3

Click here to read PART 4

Click here to read PART 5

Click here to read PART 6

Click here to read PART 7

Click here to read PART 8

Click here to read PART 9

Click here to read PART 10

Click here to read PART 11

Click here to read PART 12

Click here to read PART 13

Click here to read PART 14

Where we left off, we had learned that on March 29, 2007, an FDA advisory panel had overwhelmingly voted to approve Provenge, a prostate cancer vaccine developed by Dendreon.  As a result, most financial analysts and investors believed that Dendreon had a promising future. However, ten hedge funds (out of a universe of 11,500 hedge funds) held large numbers of Dendreon put options (bets against the company), suggesting they expected that Dendreon would be derailed. At least seven of those hedge funds can be tied to Michael Milken or his close associates.

We had also learned that Milken himself stood to profit if Dendreon were to experience  problems receiving FDA approval. This is because Milken was the early financier and principal deal maker for ProQuest Investments, a fund that (along with an affiliate) controlled a company called Novacea, which was one of Dendreon’s competitors in the race to produce a new treatment for prostate cancer. Meanwhile, Lindsay Rosenwald (a Milken crony who once helped run a Mafia-linked brokerage called D.H. Blair, which specialized in pumping and dumping fake biotech companies) controlled Cougar Biotechnology, which was Dendreon’s second competitor in the race to develop a treatment for prostate cancer. And hedge funds affiliated with Milken or his close associates were heavily invested in Cell Genesys, which was Dendreon’s third competitor.

We had learned further that Milken’s “philanthropic” outfit, the Prostate Cancer Foundation supported Novacea, Cougar and Cell Genesys. The Prostate Cancer Foundation’s support for these companies preceded announcements that they had signed massive deals with large pharmaceutical companies. In the cases of Novacea and Cell Genesys, those deals were soon cancelled on the news that their treatments were ineffective, and the companies’ investors quickly dumped their stock. This fact, combined with other evidence, suggests that the Prostate Cancer Foundation was supporting what amounted to sophisticated “pump and dump” schemes.

Meanwhile, the Prostate Cancer Foundation snubbed its nose at Dendreon. And in April, 2007, Dr. Howard Scher, who was an executive and director of Milken’s investment fund, ProQuest, and the chairman of the Prostate Cancer Foundation’s “Therapeutic Consortium”, spearheaded an unprecedented lobbying effort to convince the FDA to reject Dendreon’s treatment – the first time in history that the FDA had gone against an advisory panel’s recommendation to approve a drug for terminally ill patients. This lobbying effort had the support of government officials who have ties to Michael Milken.

In the days before and after the lobbying effort, Dendreon was trashed by a few captured journalists – most notably, CNBC’s Jim Cramer — and was also subjected to a blistering attack by naked short sellers who illegally flooded the market with millions of phantom shares to help drive down the company’s stock price. This criminal naked short selling continued intermittently for much of the next two years, while the SEC did nothing, and while other events conspired to hobble Dendreon, a company that had completed multiple clinical trials that strongly indicated that its product, Provenge, was capable of lengthening the lives of tens of thousands of men with prostate cancer.

Amazingly, the SEC will not reveal the names of the naked short sellers. As it says on its website, to release information about (illegal) naked short selling would be to reveal the (criminal) hedge funds’ “proprietary trading strategies.”

* * * * * * * *

When Dendreon’s FDA application was derailed simultaneously with a naked short selling attack that flooded the market with tens of millions of phantom shares, Dendreon’s supporters went berserk. They sent the government hundreds of letters complaining about the naked short selling and the apparent machinations of Michael Milken’s associates. After that, all but one of the ten hedge fund managers ceased to own “put options” in Dendreon.

However, the naked short selling continued pretty much unabated for two years. And in April 2009, Dendreon was once again on the SEC’s “Reg  Sho” list of companies whose stock was “failing to deliver” in excessive quantities.  Dendreon stayed on that list even after the company’s CEO announced that results of an Independent Monitoring Committee study of 500 patients were “unambiguous in nature…a clear hit” for Provenge.

After the CEO’s announcement, Dendreon’s stock, which had been as low as $4 weeks earlier, rose to the mid-20s. Then, on April 28, 2009, just hours before Dendreon was to present this “unambiguous” data to an all-important meeting of the American Urological Association, the now legendary Yahoo! message board post appeared, warning of  a “BEAR RAID” that was to occur at precisely 12:30pm Central time. Right on cue, Dendreon’s stock tanked 65% in matter of 75 seconds (to $7), within minutes of the moment predicted by that message.

Within hours after that amazing crash, Nasdaq announced that it had investigated the matter and decided to let the trades stand. This was quite remarkable, given that it would have been impossible for the exchange to determine the identity of that message board poster and sort through the trading data in such a short period of time. It is all the more remarkable considering that this “BEAR RAID” was most likely the work of naked short selling criminals.

At any rate, it is likely that short sellers, recognizing that it was now going to be more difficult to prevent Dendreon from getting FDA approval, used the opportunity of that sharp price drop to cover their short positions. Some short sellers might also have used the opportunity to buy shares, hoping to cash in on the bonanza that was to follow. After the “BEAR RAID,” Dendreon’s stock price quickly rose above $27.

The night after the “BEAR  RAID”, CNBC’s Jim Cramer (who has begun a “crusade” against the crime of naked short selling in an effort to distance himself from his previous efforts to cover up the crime of naked short selling) said “I’m not qualified to talk about Dendreon.” This was just two weeks after Cramer had screamed that Dendreon had no chance of receiving FDA approval. Now, he was no longer commenting on Dendreon’s chances, but he noted,  “I am a big believer in taking profits when I see a short squeeze. So I am going to recommend taking profits.”

Some people clearly did take profits. After Cramer’s comment, the stock started to fall, and by May 8, it was at $19. Then the buying started again. Quite possibly, some of the hedge funds that had been short selling Dendreon used the dip to $19 to purchase still more Dendreon shares. After May 8, the stock rose back up to around $25, which is approximately where it remains today. When SEC filings for this period are in, it will be interesting to see which hedge funds bought shares.

But it will remain impossible to know who the criminal short sellers were. As far as the SEC is concerned, that is a big secret –  “proprietary trading strategies.”

* * * * * * * *

After Dendreon reported its data to the American Urological Association –data that showed almost precisely what the data showed two years earlier (that is, that Provenge was safe, and that it lengthened survival times while greatly improving the quality of life for end-stage prostate cancer patients who would otherwise be subjected to the misery of chemotherapy) — Milken’s Prostate Cancer Foundation, which had long shunned Dendreon while Milken’s allies maneuvered to derail it, finally concluded that it was time to say something positive about Provenge.

“The PCF is delighted to see evidence of increased patient survival from Provenge,” the Milken “philanthropic” foundation said in a press release. “We share the analysis of Dr. Philip Kantoff, a leader in the PCF Clinical Therapy Consortium…and a principal investigator of the Provenge Phase III clinical study. The results validate 16 years of modern research to harness a patient’s own immune system to fight their prostate cancer and prolong their lives…”

The Prostate Cancer Foundation continued: “The PCF first provided funding to Dr. Eric Small…to support clinical research around measuring immune responses in patients treated with Provenge…”

In other words, Milken’s “philanthropy” hadn’t spent two years ignoring, and in some cases trying to quash Dendreon’s treatment. In fact, the Prostate Cancer Foundation had supported Dendreon all along!

This is nonsense. What the Prostate Cancer Foundation did not mention is that Dr. Philip Kantoff, the physician mentioned in the press release, was on the advisory board of Cougar Biotechnology, the company that Milken’s “philanthropic” foundation was promoting as a better alternative to Dendreon.  Moreover, Dr. Kantoff was one of the few physicians to publicly cast doubts on Provenge. He was never able to say that Provenge did not work, but when talking to the press at the time of the FDA advisory panel meeting in 2007, he was dismissive, or at least confused.

“I didn’t think [Provenge] had a snowball’s chance in hell of working,” Dr. Kantoff told Forbes magazine’s Matthew Herper, the journalist who went to lengths to argue against FDA approval. “I’m still skeptical, but I think there’s something going on here.” Kantoff suggested that Provenge could be a “slam dunk,” but maybe the trial size was too small. Left unmentioned was the fact the FDA had regularly approved treatments for dying patients when relatively small trials had shown such stunning results.

As for Dr. Small, he too was on the advisory board of Cougar Biotechnology. The Prostate Cancer Foundation did indeed give him funding to measure immune responses in patients treated with Provenge, but it is not at all clear that Milken’s “philanthropic” outfit was keen to see Dr. Small’s study yield positive results. When the study did yield positive results, Dr. Scher, the chairman of the Prostate Cancer Foundation’s Therapeutic Consortium (referred to in the above press release as the “Clinical Therapy Consortium”), spun them as negative results.

In his letter to the FDA (the one that quickly and mysteriously ended up in the hands of The Cancer Letter), Dr. Scher quoted Dr. Small as saying the following: “In summary, this study suggests that while sipuleucel-T fell short of demonstrating a statistically significant difference in TTP, it may provide a survival advantage to asymptomatic [prostate cancer] patients.” Dr. Small had not written the word “may” in italics. That was Dr. Scher’s improvisation, part of his effort to convince the world that absolute “proof” of efficacy was needed for FDA approval.

As both Dr. Small and Dr. Scher knew, the “gold standard” for physicians, and the federally mandated standard for drug approval, is “survival” — “substantial evidence” that a treatment may help patients live longer. Perhaps Dr. Small felt constrained in challenging Dr. Scher’s misuse of his study. Perhaps he also felt uncomfortable about joining Dr. Scher, who was, after all, the powerful chairman of Milken’s Therapeutic Consortium, at the meeting of the FDA advisory panel that voted on Provenge in March 2007.

Dr. Small was supposed to speak on behalf of Provenge at that panel. Perhaps this concerned the folks at the Prostate Cancer Foundation. Either way, Dr. Small was a no-show at the panel that day.

He apologized – something about a hitch in his travel plans.

* * * * * * * *

In May 2009, while Milken’s Prostate Cancer Foundation was rewriting history, Milken’s hedge fund crony, Steve Cohen, who was one of those seven hedge fund managers who had bet big against Dendreon after the advisory panel meeting in 2007, reached out to Care-to-Live, the grass-roots organization that had done so much to highlight the connections among Milken’s “philanthropy,” Milken’s investments, and Dendreon’s travails

On May 19, one of Care-to-Live’s founders received an email from an employee of CR Intrinsic Investors, which is one of Steve Cohen’s hedge funds.  “I’m an investor in biotechnology and pharmaceutical companies and I’m interested in understanding the patients perspective on Provenge and any other therapies in development…,” the email began. “Would you or someone from Care-to-Live be available speak with me…? I have spoken to a number of academic thought leaders, but I’d like to better understand what the patients want…”

And by the way, “I’m happy to provide compensation for time spent speaking with me if that is of interest.”

Milken-affiliated hedge funds already have analysts and journalists regurgitating their party line on command. They also have doctors on the payroll. Might as well put the troublemakers on the payroll, too.

* * * * * * * *

Or perhaps Cohen is genuinely thinking about investing in Dendreon. Perhaps he already has. The intentions of this network remain a matter of some speculation.

Much of this speculation focuses on Dmitry Balyasny, the Russian “whiz kid.” As recently as March of this year, when they filed their last SEC documents, Balyasny’s hedge fund, Visium, held around 900,000  call options in Dendreon. Simultaneously, the hedge fund owned 860,000 put options. It is possible that Balyasny and his associate, Jacob Gottleib, were implementing a split-strike pricing strategy – selling out of the money calls and buying out of the money puts. The effect is to create a large synthetic short position.

SEC documents show that during much of the past two years, Balyasny’s funds also owned large numbers of Dendreon shares. These could have been shares that they bought to cover short positions. Or it could be that they owned shares to gather proxy votes and put pressure on Dendreon’s management to act in ways that might not be  good for the company.

Dendreon’s latest Schedule 14-A, filed on April 30, showed that Balyasny (remember, Balyasny’s other fund was previously one of the seven hedge funds with large  bets against Dendreon) had become one of Dendreon’s largest shareholders, with a 5.5% stake in the company. Another major shareholder was Capital Ventures International, the unit of Susquehanna that did the PIPEs deal with Dendreon. Meanwhile, Joseph Edelman, the hedge fund manager who was employed in 2007 by Lindsay Rosenwald, formerly of the Mafia-connected D.H. Blair, has bought at least 2 million Dendreon shares.

In addition to those purchases, many of the Milken network hedge funds that bought Dendreon’s convertible bonds now have the capability to convert, so  they, too, might soon count themselves among Dendreon’s largest shareholders. Altogether, this network may already control (or have the ability to convert into control of) as much as 30% of the company.

It is possible that this network is planning to seize control of Dendreon by stealth. This was the modus operandi of the Milken network in the 1980s. As most every book on Milken recounts, affiliated investors (some combination of Milken, Ivan Boesky, Carl Icahn, Princeton-Newport, John Mulheren,  and others) would each buy, say, 4.9% or 9.8% of a company without declaring themselves to be affiliated investors. In some cases, Milken would “park” stock (e.g. Princeton would secretly buy stock on Milken’s behalf) in order to conceal that he had any ownership at all.

By secretly holding large blocks of shares, the network was able to acquire controlling stakes while bypassing regulatory requirements to declare such positions. Besides putting them in a position to manipulate prices, Milken and friends then put pressure on companies’ managements by quietly letting it be known that they had, as a group, a controlling number of proxy votes.

If Milken’s friends come to control Dendreon, Milken’s “philanthropic” foundation will no doubt continue to articulate its new position of being “delighted” that the data shows that Dendreon’s treatment is safe and effective (which is the same thing the data showed two years and 60,000 American deaths ago). And if the Milken network takes over Dendreon, perhaps Michael Milken will, in the name of “philanthropy,” convince his government minions to grant approval to Provenge, so that it can be administered to the patients who so desperately need it.

But that should not cause us to ignore the ordeal that Dendreon has endured during these past few years. And we should demand an end to a status quo which lets Wall Street miscreants, cheats, and manipulators (and not free markets) decide which companies survive unmolested, and which will be crippled or killed off entirely.

But it is not surprising that criminals see fit to maim public companies.

Consider that it is impossible to buy life insurance on another person’s life. The legal principle has developed that one can only insure something in which one has “an insurable interest.” But imagine that this were not the case. Imagine if it were possible for people to buy insurance on other people’s lives. One can see that there might evolve a type of criminal who would buy life insurance on the lives of others, and then arrange for those people to die.

One can even imagine that, as society wised up to this practice of buying life insurance and then manipulating outcomes, such criminals would evolve new tactics towards the same end. For example, the criminals might target newborn babies in hospitals, because babies are vulnerable, and it would be difficult for anyone to know for certain whether they were dying naturally, or as a result of criminals manipulating outcomes.

One could even imagine that the most sophisticated of these criminals would come to target newborn babies who were already sick, because manipulating their medical outcomes in order to cause their deaths would leave the slightest statistical footprint possible.

In our society one cannot buy life insurance on another person, but one can buy “life insurance” on a company: that is, one can make a bet that a company will fail, and collect on that bet when the company dies. It is the contention of Deep Capture that there are criminals who take out life insurance policies against companies, and then manipulate their outcomes so as to collect on those policies.

And just as we can understand the logic of criminals focusing on newborn babies, so too can we understand why the financial criminals have learned to focus on small, early-stage public companies. And to extend the morbid metaphor one last step: just as the criminals might focus on newborns who are already sick, because their outcomes are already in the most doubt (making the criminal manipulations hardest to spot), so too have the financial criminals learned to focus not just on early-stage public companies, but on early stage public companies working in the field of biotechnology.

That is because in biotechnology the difficulties in valuing a company are at their greatest. There is often little to no revenue.  The idea behind the company may be nothing more than the theory of a scientist. No one knows whether it will work. If it works, no one knows how long it will take to prove that it works. And even if it can be proven to work, no one knows how long it will take to clear all the legal and regulatory hurdles it will face. Such companies are favored targets for manipulators because it is easy to manipulate the truth when no one knows the truth, and whatever truth there is lies behind so many veils.

In the case of Dendreon , the truth was hard to miss. It was more than a company with a blockbuster treatment. It was the first company in decades to develop a medicine that could truly revolutionize the way that doctors treat cancer. The company had gathered its data, and the data was conclusive (to a 95% confidence level): Provenge was safe and effective. A panel of experts assembled by the FDA had declared that the treatment should be approved.

So when naked short sellers attacked, and the treatment was derailed, it was obvious that there had been foul play. Hundreds of concerned citizens took it upon themselves to investigate, and document, the footprints of the miscreants. As a result we have been able to present a highly discernible, if admittedly imperfect, picture of their trail.

But we must ask: How many other small biotech companies have been victimized in less obvious ways? How many companies were like the babies in our morbid metaphor — snuffed out before they could demonstrate their potential; killed by criminal naked short sellers and their captured accomplices (journalists, regulators, doctors) who successfully pled innocence, saying the companies died because they were sick or weak? And how many of those murdered companies, weak or not, had medicines that could eventually have improved health and saved lives?

Our morbid metaphor, you see, is not entirely metaphor. Real people have died.

In answer to the question of how many people have died, we know only from the data that abusive and illegal short selling has affected many hundreds of small biotech companies with all manner of medicines. We know that the vast majority of those companies are now gone, and that some number of them, if left to the rigours of the market, but not to the whims of criminal short sellers, would have one day delivered their medicines to patients.

But, of course, we do not know who the criminal short sellers are. According to the Securities and Exchange Commission, that is a big secret – “proprietary trading strategies.”

THE END

* * * * * * * *

Note: The original draft of this story incorrectly stated that BAM Capital was affiliated with Dmitry Balyasny’s Balyasny Asset Management. Having mistaken BAM Capital with Balyasny’s fund, I aslo suggested in the original draft of this story that Balyasny had aquired more than ten percent of Dendreon’s shares in the Spring of 2009. This was incorrect. Balyasny’s Visium hedge fund had aquired 5.5% of Dendreon’s shares. I regret the error.

Posted in Featured Stories, The Deep Capture Campaign, The Mitchell ReportComments (76)

Michael Milken, 60,000 Deaths, and the Story of Dendreon (Chapter 14 of 15)

Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

Michael Milken, 60,000 Deaths, and the Story of Dendreon (Chapter 14 of 15)



What follows is PART 14 of a 15-PART series. The last installment will appear on Deep Capture in the coming days, after which point the story will be published in its entirety.

Click here to read PART 1

Click here to read PART 2

Click here to read PART 3

Click here to read PART 4

Click here to read PART 5

Click here to read PART 6

Click here to read PART 7

Click here to read PART 8

Click here to read PART 9

Click here to read PART 10

Click here to read PART 11

Click here to read PART 12

Click here to read PART 13

Where we left off, we had learned that on March 29, 2007, an FDA advisory panel overwhelmingly voted to approve Provenge, a vaccine that Dendreon had developed for prostate cancer. As a result, most financial analysts and investors believed that Dendreon had a promising future. However, ten hedge funds (out of a universe of 11,500 hedge funds) held large numbers of Dendreon put options (bets against the company), suggesting they expected that Dendreon would be derailed. At least seven of those hedge funds can be tied to Michael Milken or his close associates.

We had also learned that Milken himself stood to profit if Dendreon were to experience unexpected problems receiving FDA approval. This is because Milken was the early financier and principal deal maker for ProQuest Investments, a fund that (along with an affiliate) controlled a company called Novacea, which was one of Dendreon’s competitors in the race to produce a new treatment for prostate cancer. Meanwhile, Lindsay Rosenwald (a Milken crony who once helped run a Mafia-linked brokerage called D.H. Blair, which specialized in pumping and dumping fake biotech companies) controlled Cougar Biotechnology, which was Dendreon’s second competitor in the race to develop a treatment for prostate cancer. And hedge funds affiliated with Milken or his close associates were also heavily invested in Cell Genesys, which was Dendreon’s third competitor.

We had learned further that Milken’s “philanthropic” outfit, the Prostate Cancer Foundation, which appears to act in concert with Milken’s investment fund, ProQuest, had supported Novacea, Cougar and Cell Genesys. The Prostate Cancer Foundation’s support for these companies preceded announcements that they had signed massive deals with large pharmaceutical companies. In the cases of Novacea and Cell Genesys, those deals were soon cancelled on the news that their treatments were ineffective, and the companies’ investors quickly dumped their stock. This fact, combined with other evidence, suggests that the Prostate Cancer Foundation was supporting what amounted to sophisticated “pump and dump” schemes.

Meanwhile, the Prostate Cancer Foundation snubbed its nose at Dendreon. And in April, 2007, Dr. Howard Scher, who was an executive and director of ProQuest, and the chairman of the Prostate Cancer Foundation’s “Therapeutic Consortium”, spearheaded an unprecedented lobbying effort to convince the FDA to reject Dendreon’s treatment – the first time in history that the FDA had gone against an advisory panel’s recommendation to approve a drug for terminally ill patients. This lobbying effort had the support of government officials who have ties to Michael Milken.

In the days before and after the lobbying effort, Dendreon was trashed by a few captured journalists – most notably, CNBC’s Jim Cramer — and was also subjected to a blistering attack by naked short sellers who illegally flooded the market with millions of phantom shares to help drive down the company’s stock price. This criminal naked short selling continued intermittently for much of the next two years, while other events conspired to hobble Dendreon, a company that had completed multiple clinical trials that strongly indicated that its product, Provenge, was capable of lengthening the lives of tens of thousands of men with prostate cancer…

* * * * * * * *

In July 2008, not long before Cell Genesys announced that its drug was killing people, CNBC’s Jim Cramer called Dendreon a “dog.” Cramer, of course, did not mention that the illegal naked short selling of Dendreon was continuing apace. Throughout that month, more than 1 million Dendreon shares “failed to deliver” every day, according to SEC data.

At the end of August 2008, after Cell Genesys announced that its drug was killing people, Milken’s Prostate Cancer Foundation posted a story that suggested that this failure was a sign that Dendreon could be in trouble, too. Clearly, the Prostate Cancer Foundation, whose top officials had done so much to derail Dendreon in 2007, were not eager to see the company’s treatment reach patients.

Not once did the Prostate Cancer Foundation note that the difference between Dendreon and the three companies promoted by the Prostate Cancer Foundation was that Dendreon had provided heaps of evidence that its treatment actually worked.

In October 2008, Dendreon released still more favorable data. Its Independent Monitoring Committee’s studies were showing (as had the company’s phase 3 trials in 2007) that Provenge was safe, and offered a significant survival advantage over a placebo.

Meanwhile our two favorite financial analysts – the singing Sendek and Jonathan Aschoff – continued to reiterate their sell ratings on Dendreon.

The attacks continued through March 2009, which is when we were treated to the reappearance of  Matthew Herper, the Forbes reporter who had dismissed Dendreon during those strange occurrences in April 2007. Now, Herper published a story in which he made it clear that Dendreon’s treatment would not, and should not, be approved by the FDA.

In support of his claims, he cited the analysis of Dr. Thomas Fleming, one of the three people whose missives had ended up in the hands of The Cancer Letter. To show that Fleming (who is not a physician, but rather a statistician) was not the only “expert” opposed to Dendreon’s treatment, Herper cited several other “experts”  – Susan Ellenberg, Donald Berry, and Janet Wittes – who had views that were remarkably similar to Fleming’s.

What Herper did not mention is that Susan Ellenberg had co-authored a book with Fleming, Janet Wittes was credited with editing that book, and that book enthusiastically cited the work of Donald Berry. Clearly, these “experts” had worked together to make sure that one message was whispered in Herper’s ear.

While Herper was working on his article, John Stewart of the “Daily Show” began exposing Jim Cramer as a fraud. This created quite a stir, and in the midst of it Cramer went on CNBC to tout none other than….Cougar Biotechnology, the company controlled by Lindsay Rosenwald, formerly of the Mafia-linked “pump and dump” shop D.H. Blair. Cramer said he thought Cougar was the next big thing in prostate cancer treatment, and everybody should load up on its stock.

Meanwhile, with Novacea and Cell Genesys killing people, Milken’s “philanthropic” outfit was now directing much of its energy to promoting the mostly untested treatment then being hawked by Cougar Biotechnology.

Cougar’s treatment “has recently attracted global media coverage,” began one Prostate Cancer Foundation press release, which described the treatment as “a promising experimental medication with the potential to treat patients who have failed conventional medical treatment for advanced prostate cancer…”

The press release continued:  “The [Prostate Cancer Foundation] Therapeutic Clinical Investigation Consortium played an important role by accelerating US clinical testing of this new agent in Phase II clinical trials….In Phase 1 studies, [Cougar’s treatment] exhibited the potential to attenuate disease progression and shrink tumors.”

Actually, the studies were not quite so encouraging as Milken’s foundation would have one believe. Abiraterone had been tested on a total of 30 patients. These patients purportedly experienced declines in levels of “prostate specific antigen,” but this is a long way from demonstrating that  Cougar’s treatment “attenuates disease” or “shrinks tumors.” As for that “potential to treat patients,” it will be at least two years before Cougar has enough data to submit an application for FDA approval.

For the sake of prostate cancer patients everywhere, Deep Capture hopes that Cougar’s drug proves to be successful. We wish merely to note the different reception the network of Milken cronies delivers to a drug like Provenge, whose supporting data is ample and overwhelmingly positive, versus the opinions the network expresses about a drug whose data is preliminary and inclusive, but whose investors hail from the Milken network.

We also wish to reiterate that Milken’s Prostate Cancer Foundation and people tied to Milken gave ringing endorsements to companies – Novacea, Cell Genesys, and Cougar Biotechnology – right before those companies entered into purportedly massive deals with major pharmaceutical companies. In the cases of Novacea and Cell Genesys, those massive deals were canceled soon after they were signed because the companies’ treatments were shown to be ineffective.

Yet, in all three cases, investors with ties to Milken or his close associates made large fortunes selling out their stock soon after the companies received over-the-top endorsements from the Prostate Cancer Foundation. Meanwhile, the Prostate Cancer Foundation, whose officials had played a key role in derailing Dendreon back in 2007, continued to snub its nose at Dendreon’s Provenge, the one treatment that could be safely and effectively administered to patients – right away.

* * * * * * * *

It is not clear if Milken himself was invested in Cougar, but Dr. Samuel Saks, who was a director on Cougar’s advisory board, was also a board member of Milken’s fund, ProQuest Investments. Three other members of Cougar’s advisory board were doctors affiliated with Milken’s “philanthropy,” the Prostate Cancer Foundation.

In addition to Rosenwald, the biggest investors in Cougar Biotechnology have included Millennium Management (the hedge fund that was co-founded by the guy who was going to murder Ivan Boesky, and later died of an early heart attack) and Visium Capital, which is co-owned by Dimitry Balyasny and Jacob Gottleib.

As noted, Millennium, Visium and Balyasny were also among the largest shareholders in Cell Genesys when the Prostate Cancer Foundation began promoting that company’s treatment, GVAX, in mass mailings and flyers handed out in front of shopping malls. Millennium’s manager and Dmitry Balyasny, meanwhile, were among the seven traders who were betting big against Dendreon in March 2007.

The few media stories about Balyasny make him seem like he is a “prominent” investor – and a poster boy for the American dream. Born in Russia, he came to America as a young man and soon started raking in the bucks as a “whiz kid” investor. In addition to Visium, Balyasny is the proprietor of Balyasny Asset Management. Some of Balyasny Asset Management’s employees —  including, for a period of time, the fund’s chief risk officer — have come from SAC Capital, the hedge fund run by Milken crony Steve Cohen.

A great many of Balyasny’s other employees were hired from a hedge fund called Magnetar Capital. The senior partner and investment committee chairman of Magnetar is Michael S. Gross, who was previously a founding partner of Apollo Advisors, the investment fund run by Milken crony Leon Black.

As you will recall, Leon Black funded the new Milken “philanthropic” foundation that hired National Cancer Institute prostate cancer chief Alison Martin after she helped the chairman of Milken’s Therapeutic Consortium foil Dendreon’s FDA application. Leon Black is also a business partner of Felix Sater, the alleged Russian mobster who once stuck a broken stem of a wine glass through a stock broker’s face and then went on to run White Rock Partners, a Mafia-infested brokerage that was indicted for manipulating stock in cahoots with the above-mentioned Lindsay Rosenwald’s D.H. Blair.

Prior to starting his own hedge funds, Balyasny was the top trader at an outfit called Schonfeld Securities, the proprietor of which is a man named Steven Schonfeld. Prior to founding his firm, Schonfeld worked for Blinder Robinson (then known on the Street as “Blind’em and Rob’em”). Blinder Robinson was among the first firms to be shut down by the Feds when they began investigating a network of Mafia-linked brokerages that included Rosenwald’s D.H. Blair and Sater’s White Rock Capital.

Schonfeld worked at Blinder Robinson with Anthony Elgindy, the criminal naked short seller who was was later sentenced to prison for stock manipulation and bribing FBI officials. As you will recall, Elgindy appeared for his sentencing missing a finger – reportedly because the Russian Mafia forced him to saw it off, giving him something on which to meditate while he served his 11 years in jail. Meanwhile, the Elgindy investigation led the authorities to other hedge funds, such as Gryphon Partners, whose manager was later among the few who bet big against Dendreon.

As should be clear by now, it is significant that a preponderance of the hedge funds that bet big against Dendreon, and a preponderance of the hedge funds that were invested in the three Milken-promoted companies – Cell Genesys, Novacea, and Cougar Biotechnology – were part of the same network. And it is significant that much of this network seems to be centered on Michael Milken and Steve Cohen, who became the “most powerful trader on Wall Street” some years after he was investigated by the government for trading on inside information provided to him by Milken’s shop at Drexel Burnham.

Permit me to repeat a few facts:  Cohen was once the top earner for Gruntal & Company, which was simultaneously employing several traders who were later tied to the Mafia. When Gruntal was indicted for embezzling millions of dollars, many of its former employees went on to fill the ranks of  White Rock Capital, run by the alleged Russian mobster Felix Sater (he with the broken wine glass).

Cohen, meanwhile, had left to start his own hedge fund empire. Cohen’s hedge funds have helped pump stocks promoted by D.H. Blair, which was eventually indicted on 173 counts of securities fraud and implicated in a Mafia stock manipulation scheme that was orchestrated by White Rock Capital.

Lindsay Rosenwald, who is the son-in-law of D.H. Blair’s founder and a former top executive of D.H. Blair, was not only the controlling shareholder of Cougar Biotechnology, but also the proprietor of a hedge fund called Paramount Capital. The vice president of Paramount was formerly a top trader for Steve Cohen’s SAC Capital. The vice president of the above mentioned Millennium Management is also a former top trader of SAC Capital.

And Cohen, who is maniacal about his working relationships, is on close terms with Schonfeld Securities, run by the former employee of Blind’em and Rob’em.  Cohen has employed Schonfeld’s traders, including Anthony Bassone, who was until recently assistant controller of SAC Capital; and Rob Cannon, who is Cohen’s top personal trader at SAC. Another “Russian whiz kid”, Michael Orlov, created the computerized trading infrastructure at both SAC and Schonfeld Securities. And, as mentioned, Cohen shares employees and trading strategies with that other “Russian whiz kid” — Dmitry Balyasny, who was once Schonfeld’s biggest earner.

All of which I mention only because I fancy myself a biographer of a particularly destructive network of Wall Street personalities. It may be of no significance that out of Planet Earth’s 11,500 hedge funds, there were only ten hedge funds with large numbers of Dendreon put options at the end of March, 2007.  There may be no significance to the fact that of those ten hedge funds, seven were in the same network — Millennium Management; Balyasny Asset Management; WS Capital (the successor to Gryphon Partners); Perceptive Advisors (whose manager was simultaneously working for Paramount Capital); Bernard Madoff Investment Securities; Pequot Management; and SAC Capital (managed by Steve Cohen, who is said to be maniacal about maintaining working relationships with people in his network).

And it could be purely coincidence that these hedge funds were the largest holders of put options on Dendreon shares right at the time that Dendreon was getting clobbered by massive amounts of illegal naked short selling – and right before Dendreon’s treatment for prostate cancer was stymied by an unprecedented lobbying effort led by FDA-contracted doctors and government officials tied to Michael Milken.

By the way, three months later – at the end of June, 2007 — there was just one more hedge fund with large numbers of Dendreon put options. It is not clear from SEC filings whether these put options were bought before or after the FDA announced (on May 8, 2007) that it would  not approve Dendreon’s treatment.

Either way, it is probably another coincidence that this eleventh hedge fund that bought large numbers of put options was the above-mentioned Magnetar Capital.

* * * * * * * *

To be continued…Check in soon for Chapter 15.

Posted in Featured Stories, The Deep Capture Campaign, The Mitchell ReportComments (52)

  • Latest
  • Comments
  • Tags
  • Subscribe

Related Sites

Message from DeepCapture.com

At the time much of the content on DeepCapture.com was written, the Great Financial Crisis of 2008 was either on the verge of happening or had just occurred. In those days, emotions among this publication’s contributors were raw and, in an effort to get their warnings noticed and appropriate blame placed, occasionally hyperbolic language and shocking imagery were employed.

Were we to write these entries today, a different tone would most certainly prevail.

Yet, being a record of a pivotal time in our global economic history, we’ve decided to leave the rawness unedited, with the proviso that readers take the context of the creation of certain posts into account, and that those easily offended re-consider the decision to read them.