In the movie Wall Street, the character Gordon Gecko expounds to an audience of shareholders, “Greed is good.” Gecko, a Wall Street tyrant whose specialty was destroying companies for profit, eventually gets his due in the end. But there are real life market manipulators that prowl the shadows of Wall Street and in the genre of biotech the greed of the market manipulators sometimes kills.
People with a cursory understanding of market manipulation understand the tactic of “short and distort.” This is a type of securities fraud in which market manipulators short sell a stock and then spread negative rumors about the company in an attempt to drive down stock prices. Sometimes this fraud is originated by a company’s competitors. Other times it is fueled exclusively by greed. And while a successful short and distort campaign may glean hefty rewards for those who perpetrate the crime, the fiscal malfeasance is often fatal for the company that is attacked.
A good example of this is playing out in real time.
On Monday, July 30, 2014, Galectin Therapeutics, a company working on a promising avenue in the fight against kidney, liver and lung fibrosis, as well as melanoma, issued a statement about findings from a cohort 2, phase 1 drug trial. The company has received “fast track” status from the FDA. CNBC reports that no FDA fast tracked drug that has advanced to “breakthrough drug” status has failed to come to market. And with excellent cohort 1 results, it appeared as though the company was well on the way to developing cures for diseases which exist today as terminal. But while the results of the cohort 2 trial were considered positive in the eyes of subject experts, the market manipulators saw an opportunity to defraud the investors and the public, inflicting tremendous damage on the company and the company’s work on a cure for these diseases.