Thursday, August 16, 2007

More Fish Tales at Northfield Labs

In its recent proxy statement, Northfield Laboratories (NFLD-$1.16), which is developing a hemoglobin-based oxygen-carrying red blood cell substitute (PolyHeme) for the treatment of urgent, large volume blood loss in trauma, revealed that its Chief Executive Officer, Steven A. Gould, M.D., received $365,000 in base salary and was awarded a $100,000 cash bonus.

The 10Q Detective chose not to ignore the remuneration—no matter how small the actual payment—for it epitomizes the disconnect between pay and performance goals.

The Compensation Committee said, “2007 bonuses were paid based on the achievement of board approved performance goals in the areas of clinical, regulatory, manufacturing and administration.”

In fiscal 2007, shares in Northfield stumbled more than 94 percent in value, as its red blood cell substitute,
PolyHeme, failed to meet the primary goals of mortality and safety in a pivotal Phase III study.

The 10Q Detective recognizes that because patient enrollment was conducted primarily in urban settings (urban Level I trauma centers have the patient volume, resources and sophistication to conduct a clinical trial of this complexity), transit times in the ambulance would be briefer than in rural or ‘conflict’ areas (war). As patients in the control group reached the hospital quickly, they had early access to blood, in relatively short periods of time.

Suspicion became fact, for the observed outcome in the trial did not demonstrate the expected survival benefit that might have occurred if the trial were being conducted in the rural setting.

Irrespective of the clinical setting, however, Northfield could not ‘explain away’ why the incidence of cardiac adverse events were higher in the PolyHeme group than the control group (who received crystalloid solution in the field), at 35% (123 patients) compared to 29% (105 patients), respectively (p>0.05). And, the overall incidence of MI in the study as reported by investigators was 2%: eleven PolyHeme patients and three control patients (p £ 0.05). Three PolyHeme patients and one control patient died.

Northfield rewarded Messer. Gould cash bonuses of $140,000 and $100,000 in fiscal 2006 and fiscal 2005, respectively, despite the expiration in 2006 of five key United States patents and a pending patent expiry of the broadest issued United States patent come 2008.

Whatever you say, say it with conviction. ~~ Humorist Mark Twain (1835 – 1910)

The Committee also said that during its 2007 fiscal year, the amount of Dr. Gould’s compensation (salary) was determined “based principally on compensation levels applicable to the chief executive officers of similar or competitive companies."

Northfield has two public competitors in the race to bring to market a blood substitute (oxygen-transport) product: (1) Biopure Corporation (BPUR-$0.92), which is developing a bovine hemoglobin-based oxygen carrier product,
Hemopure; and (2) Synthetic Blood International (SYBD-$0.10), which is developing a perfluorocarbon-based oxygen carrier product, Oxycyte.

Biopure previously withdrew a proposed BLA in the United States for Hemopure in Level 1 trauma centers (hospital setting) due to safety concerns. However, the company has submitted a final study report to the FDA for the first trial in its cardiovascular ischemia program (COR-001).

CEO Zafiris G. Zafirelis received a salary of $253,016 and $250,016 from Biopure in fiscal 2006 and fiscal 2005, respectively. The Company, however, did not award Messer. Zafirelis a bonus in either of the last two years.

After receiving clearance from the FDA, Synthetic Blood conducted a Phase I clinical study on Oxycyte, which was completed in December 2003. Phase II clinical trials are expected to continue through the end of 2007 and into 2008 (pending receipt of requisite R&D monies).

President Robert Nicora earned a salary of $173, 250, $189,000, and $189,000 in fiscal 2007, fiscal 2006, and fiscal 2005, respectively. Synthetic Blood did not reward any cash bonuses in any of the aforementioned years to Messer. Nicora.

To the contrary, in determining compensation policies and the composition and levels of compensation for its executive officers, the Compensation Committee at Northfield is blatantly not reviewing “publicly available information regarding the compensation paid by similar companies.

Liar, liar
Your pants on fire
Your hair's sticking up
Like a telephone wire
Editor David J. Phillips does not hold a financial interest in Northfield Labs. The 10Q Detective has a Full Disclosure Policy.

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