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PHARMA: Pain Therapeutics causes yet more headaches

Those of you hanging out here for a while know that I’m a long term holder of Pain Therapeutics stock. The pitch is that it has three drugs in phase III trials, one for pain, one for IBS and one a non-alterable version of Oxycontin. the stock went public at 14, it usually trades between 6 and 9, and I bought a boatload at between 2 & 4 in the dark days of late 2002/early 2003.

Now I’ve been hanging on for the last of two phase III trials of its star drug Oxytrex, which is supposed to be a non-addictive version of Oxycodone (the active ingredient in Oxycontin which is a multi-billion $$ drug). The first Phase III trial looked good, but was a little inconclusive, and the stock that was hovering in the 5-6 range didn’t move much. Still given the company’s market cap is only in the low hundred millions and any one of these drugs alone if successful is worth several billions, it’s always looked a good bet to me.

Then last week Pain Therapeutics cut a great deal in which it essentially passed off a share of the profits and all of the costs for its third line drug Remoxy (yes the CEO’s name is "Remi"–no ego huh!), which is a non-alterable version of Oxycontin (and therefore can’t be abused as Oxycontin or "Hillbilly Heroin" is frequently), to King Pharma for up to $400m, including $150m in cash.  The stock went up about $2.50 and I was looking forward to a conclusive phase III for Oxytrex leading to an FDA approval.

So today the Phase III results are out and they are maddening.  The drug appears to work, but too many people dropped out of the trial, and so the results are not statistically significant. My guess is that the FDA will make them go around again.  The stock is now back down to more or less where it was before the King deal (so I suppose it could have been a good deal worse). But still no clear end in sight.

I’ve been hanging on for about 3 years.  And of course in the meantime I didn’t buy any Google stock because it didn’t have much upside….

Any suggestions from my readers as to what I should do now?

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Matthew HoltTom Leith Recent comment authors
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Matthew Holt
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Tom. Thanks I was expecting “sell” or “buy more” but I take your points. I am a former futures trader in a previous life and I regard mutual funds as basically organized theft, and I suspect that I can do as well as them in sectors and stocks I follow. I follow about 20-30 but tend to dip in and out. The advantage of buying an individual stock (especially one that you think has been unneccessarily crucified) you can limit your downside loss but have a huge upside. I’m not what I’d call rich, so returning the S&P every year… Read more »

Tom Leith
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Tom Leith

You don’t say how much of your wealth you have tied up in this company. If it is in the 5% range and you still basically trust the company’s (egotistical) managers to make the best possible decisions for you GOING FORWARD, go ahead and ride it out. The proper question to ask before any decision to sell is “what has changed?”. If you no longer trust management, or you look at the details of the trial and decide that the market has estimated the company’s value wrongly, then you will take action. Maybe you will buy more of the stock.… Read more »