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The story of Anal Insulin, or how Pete lost his money (part II)



October 12, 2008 – Comments (0)

For the next few weeks, things were pretty quiet for Gluteus Pharmaceuticals. The stock moved around in a very narrow range, and Pete was impatient for the big move. When was the New York Times or someone really big going to break the story? Anal Insulin was real news! In the meantime he discovered Yahoo Finance and read some more stories about Gluteus. It turns out that they hadn't always focused on Anal Insulin. At various other times, it seemed they had been more interested in anal delivery of other types of drugs. There was an antibiotic, a migraine medication, and even something about a flu vaccine. Strangely enough, Pete couldn't find any mention of those other projects on Gluteus' website. But the company finally seemed to have hit their stride with Anal Insulin. The company had reported strong results from a phase II trial earlier in the year, and that press release had prompted the magazine article Pete had read. Now the company was planning a phase III trial with sites in Turkmenistan, Mongolia, Uruguay, and several other countries. The company was also negotiating for approval of Anal Insulin with the drug regulatory agencies of Laos and Burkina Fasso. Pete figured it would be about a year to get the phase III trial done and maybe another six months before the FDA approved it. After that Gluteus would be off to the races.

 Finally, after a couple of months, the company showed some activity. Anal Insulin was approved for use in Burkina Fasso, and shortly afterwards in Laos. The phase III trial also started to enroll patients according to a company press release. Meanwhile, the share price started to creep up gradually with more positive days than negative, and eventually made it to 8.3. Pete's twenty thousand was now twenty-five thousand, and he was kicking himself for not having bought more shares when the stock was cheaper. Still, he'd made a reasonable investment, and he started to entertain thoughts of what he would do when he finally sold out at about 100. Pete wasn't an extravagant spender, but the one thing he'd always dreamed of was driving a brand new Porsche 911 Carrera. If that was ever a realistic idea before, his divorce and the child support payments had pretty much quashed it. But now that he had the Gluteus thing going, he could practically smell the new leather upholstery and feel the horsepower crawling up his arms even when he drove his 2002 Jetta in to work.

 After the phase III trial began, there weren't any substantial developments for quite some time. Every once in a while the company would issue a press release about a poster presentation at some diabetes conference, or rehash old news about Anal Insulin being distributed to Burkina Fasso and Laos. The Gluteus stock price held fairly steady. Then one day, a boat full of British soldiers was captured by Iran in the Persian Gulf. A tense standoff ensued, and with the threat of rising oil prices there was a substantial drop in the broad market indices. The pain was felt especially hard in small cap stocks, and a lot of small cap biotechs weakened considerably. One company that seemed to feel it particularly hard was Gluteus, which entered into a rather precipitous decline over the next few days that saw it drop through Pete's entry point of 6.5 and finally hit some support around 5. Pete watched the daily drops helplessly, expecting the trend to reverse every day and scratching his head in confusion when it didn't, even after the British soldiers were released and relations with Iran were smoothed over. The broad markets, on the other hand, had rebounded nicely.

In the meantime, Pete discovered the Yahoo Finance message boards. Here he discovered a whole community of people who shared his excitement about Gluteus Pharmaceuticals and Anal Insulin. Admittedly, some of them seemed a little unbalanced and posted several times every day without writing a single thing that seemed to make any sense. But there were quite a lot of highly intelligent people, some of whom claimed to be doctors and even endocrinologists, who felt convinced that it was only a matter of time before Anal Insulin became standard therapy for diabetes. The general opinion about the decline in stock price was that it was the work of certain powerful hedge funds who were forcing the price down in order to take shares from retail investors as they panicked. Once they had all the shares, these manipulators would then reverse their techniques in order to allow Gluteus stock to soar into the stratosphere. Only those investors of strong constitution, willing to hold their shares no matter what, would be able to join the powers that be in the promised land. Pete wasn't sure about that theory, but no matter how many times he read the company press releases and the other scraps of commentary he found, he couldn't find a reason why the stock would go down when the Anal Insulin program seemed to be moving forward.

 Over the next few months, Pete tried not to think too much about his investment. He didn't want to panic himself into selling at a loss. But the share price slowly and steadily eroded, first to 4, and then a couple of months later to 3. Gluteus stepped up its press releases, updating on the progress of enrollment. It seemed slower than Pete would have expected, given the number of clinical sites and how many millions of diabetics would be eligible for the trial. But Pete had never run a clinical trial so he assumed there must be a lot of factors he wasn't aware of. Gluteus also never mentioned any revenue from those countries where they had gotten Anal Insulin approved. They seemed to be shipping the product, but there was a lag time in actually booking revenue. Some kind of accounting issue, another area that Pete didn't understand well. Pete figured that those approvals still had to be a good thing. After all, once the drug was in use other countries would naturally follow in a kind of domino effect. Who would want to be the last country injecting their insulin when everyone else was happily inserting it anally? 

 To be continued ... 

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