Reading through the posts on the MSB forum it all feels like...

Reading through the posts on the MSB forum it all feels like Australia has sent its heavyweight boxing champion over to the US for a shot at the title and he has been knocked out in the first 30 seconds of round one.

I just haven’t studied MSB and its clinical trials in any depth to provide much content knowledge. And I have little knowledge of the financial machinations of IPOs and NASDAQ listings.

But a few thoughts ...

I do think the SA article was extremely damaging. Not perhaps so much for the content but for the fact that it signalled to the market that the company was going to come under a serious short attack.

For those interested in how life sciences companies are targeted for short attack in the US I would recommend Smith on Stocks.
http://smithonstocks.com/illegal-na...rt-of-an-extensive-stock-manipulation-scheme/

Compounding the problem of the negative SA article was the lack of a corresponding push back by the longs. Where was detailed response from professional analysts? There was none – 12 feeble responses on SA.

So it was pathetic and perhaps the company should have paved the way here better with a proper public relations campaign. Where the eminent clinical staff conducting these trials for MSB essentially made the point that they are not interested in wasting their time and that they are hopeful of positive results.

An eminent professor from an eminent teaching hospital will always beat an anonymous blogger on SA shorting a company. For the very good reason that anonymous bloggers on SA, in this case Alpha Exposure, don’t actually know anything.

To begin with they are not actually one person, they are several. And they have access to people who have trial methodological skills. Armed with this knowledge and good writing / journalistic skills, they can dismantle any clinical trial in the world. With a cookie cutter type approach that is honed over time by through the experience of dismantling a few dozen trials.

Why do I say they don’t know anything? Take one of their major critiques. MSB data mined to make their P2 trials look good when really they failed. And so because of this their P3 trial will certainly fail and everyone will lose their money.

Alpha Exposure (or rather their researchers) dredge up a variety of statistically orientated articles to scare the bejesses out of everyone about the horrors of post-hoc subgroups analyses. And for not correcting for multiple comparisons. All their points are well made in the context of a P3 confirmatory trial. But the trials in which this occurred were not P3 trials they were P2 exploratory trials.

Phase 2 clinical trials are simply designed to test whether new treatments show enough activity to warrant spending the big bucks on further trials into P3. And the results from P2 guide the design of the P3 study.

There is nothing magical about a p value of 0.05 in a P2 trial You can set it wherever you like – it depends where you want to balance the trade-off between type 1 and type 2 errors. Which is also why no-one cares about multiple corrections in P2 because statistical significance is nearly completely unimportant. It is the clinical / practical / commercial implications of the effect size of a variable you are looking at which is important.

Now it is very rare that you don’t see considerable disjointedness between P2 and P3. Patient inclusion / exclusion criteria change, dosages might be increased, primary and secondary outcomes are tweaked etc etc. In a dream world there would no disjointedness but in reality there will nearly always be so.

Now these all these issues are hotly debated in obscure difficult to access journals. Different areas of medicine take slightly different approaches. Oncology trials are viewed as having way too high a failure rate in P3 and so tightening criteria around that decision made in P2 has merit. But in other areas perhaps more treatments need to get through P2 into P3 but because of market realities (not enough rich people with a disease) its not worth the risk.

So it very much a subjective decision whether to proceed from P2 to P3. Not mainly statistical in the sense of null hypothesis testing. And that is why a Alpha Exposure will only get you so far. The authors really just point the reality that the process is far less objective than we all might like to hope for ... and where we are risking a risk large chunk of our money. So yep risky and scary. But without content knowledge around those subjective trial decisions that have been taken by MSB the article is simply superficial.

Take the converse scenario. MSBs earlier trials were a clear outstanding success. No need for any post hoc anything. Everything worked perfectly and they headed into P3 just as they had designed their trials in P2.

But wait ... a Nobel prize winning eminent professorial heavyweight from Harvard University writes a very negative article on the treatment in Nature. I would say positive P2 trial results with alpha at 0.05 occur 1 in 20 times by chance and if the famous professor puts his reputation on the line, has no financial conflict of interest, is not shorting the share, and seems to be enjoying the support of his collegues ..... well then you are buggered.

The only other observation here is perhaps not to see this as battle between the longs and shorts. It is between hedge funds / institutional investors and retail. The hedge funds will burn the retail shorts with as much pleasure as they took burning the retail longs. And they will do this by restricting the availability of shares for retail traders to shorts ... and by paying for “positive’ SA articles by other serious plausible seemingly knowledgeable individuals.

Clinical trials might be a noble undertaking ... the market realities of speculative biotechs on the Nasdaq are anything but.

So hopefully our boxer is not down for count. If you believed in the company before, I think the onus is really on the company to better support your belief now.

Good luck Southoz.