In 2002, Tom Jacobs took a look at the Biotech Bargain Bin -- fallen biotechnology stocks with interesting research and lots of cash. One of those companies was $4.19-a-share Maxim Pharmaceuticals
Maxim looked interesting because the company was burning through $33 million of cash yearly to fund its research. Doing simple math, the company could survive 3.3 years before new funding would be required -- and, maybe, new funding would never be needed.
Was there pixie dust in the air? Were Polo Ralph Lauren
The company is reporting today that Ceplene, its drug in phase 3 trials for the treatment of advanced malignant melanoma in patients with liver metastases, has failed to meet its primary endpoint. The news sent the stock down more than 50% to $3.19 a share -- a new 52-week low and less than its 2002 bargain bin price.
Today's failed test focused on promising data from a previous Ceplene test that did not win FDA approval and sent the stock to the bargain basement. With more than $2 in cash per share, Maxim is not dead financially -- although it bit the dust today. It's just mired in the bargain bin because failed drug tests are as appealing as out-of-fashion apparel.
Did the four "bargains" with the longest survival terms fare better? The stocks of Celera
The risk in biotechnology start-ups is extremely high. They are sent to the bargain bin for a reason -- and trying to screen the best of the bargains by looking at cash does not produce encouraging results.
Fool contributor W.D. Crotty does not own stock in any of the companies mentioned.
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