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Cell Genesys and Dendreon Inc. - If Only There Was A Pattern

By Mark Mitchell, Published: September 4th, 2009 11:57 AM CDT

In December 2007, three U.S. Congressmen — Mike Michaud (D-Maine), Dan Burton (R-Indiana) and Tim Ryan (D-Ohio) — called on the House Commerce Committee to investigate why the FDA failed to approve Dendreon’s treatment for prostate cancer. Referring to Dr. Scher and his ally, Dr. Hussain, the lawmakers said in a letter that “there are reasons to believe that serious ethics rules were violated by two FDA advisory panel members in their decision [to vote and lobby against Dendreon] and that these violations played a role in the subsequent FDA decision not to approve Provenge at this time.”

A bipartisan group of 12 additional Congressmen eventually signed on to the request for an investigation. And in February 2008, as outrage over this scandal spread through the medical community, a group of seven respected doctors, calling themselves “Physicians for Provenge” wrote a letter to the ranking members of the House Commerce Committee, suggesting that the investigation should urgently proceed.

“Please consider why our colleagues and we KNOW that Provenge works and why tens of thousands of men with late stage prostate cancer should be given access to it,” the physicians wrote. Noting the “egregious conflicts of interest” of Dr. Scher and Dr. Hussain, the “Physicians for Provenge” added that the “FDA should be carefully assessing risk versus reward for the treatment of terminally ill patients, rather than ‘gate keeping’ based on outdated statistics, reducing short-term health costs or backroom shenanigans.”

Nonetheless, Commerce Committee Chairman John Dingell denied the requests for an investigation. To justify this decision, Dingell wrote in a letter to the committee that an “investigative hearing prior to an agency’s final decision runs the risk of interfering with the normal regulatory process.”

Apparently, it was fine if FDA-contracted doctors and government officials tied to Michael Milken corrupted the normal regulatory process by obfuscating approval standards (”substantial evidence” versus “proof”) and by drafting unsolicited post-vote letters with back-channel help from a government employee who was weeks away from taking a new job created by Michael Milken.  But investigating such improprieties would corrupt the regulatory process, in the eyes of Commerce Committee Chairman John Dingell.

Dingell also pointed out that “a new law strengthening conflict of interest provisions now governs FDA panels.” Unfortunately, that law was passed in September 2007, some months after Milken’s conflicted allies derailed Dendreon’s application.

In any case, it is not clear that the old conflict of interest provisions were not violated in the Dendreon case. Dr. Scher received a conflict of interest waiver, but in his application for that waiver he did not mention his financial ties to Milken’s ProQuest Investments. There should have been an investigation into why that waiver was granted. And while he was at it, Representative Dingell should have investigated the illegal naked short selling of Dendreon and the “backroom shenanigans” of Milken’s captured officials at the FDA and the National Cancer Institute.

At any rate, while the congressional investigation was being stopped in its tracks, Milken’s Prostate Cancer Foundation was becoming more brazen.

In March 2008, for example, the Prostate Cancer Foundation sent out a peculiar mass mailing. Written by a cardiologist on Prostate Cancer Foundation letterhead, the mailing began, “I’ll never forget the day my 5-year-old son came home from school, worried. One of the other kids told him I was going to die.”

The letter went on to describe the horrors of being diagnosed with prostate cancer. So far, all kosher. But then came the strange part – the charity’s solicitation explicitly promoted a mostly untested experimental treatment that was being developed by a public company that was considered to be one of the few competitors to Dendreon. The treatment was called GVAX, and the company developing it was called Cell Genesys.

The author of the letter noted that during his treatment, he had “learned about some of the groundbreaking research projects supported by the Prostate Cancer Foundation, such as GVAX, a drug now in phase 3 clinical trials that boosts the immune system to fight off prostate cancer cells.”

Notice that the name of the drug – GVAX – was printed in boldface letters, so nobody could miss it. Notice, too, the underlining, which stressed that this treatment (as opposed to others, such as Dendreon’s) was endorsed and supported by the Prostate Cancer Foundation. And, finally, notice the unequivocal statement that GVAX works – that it “boosts the immune system” and is able to “fight off” cancer.

Lest there be any question that Milken was eager to promote GVAX, the Prostate Cancer Foundation, soon after, began distributing flyers at supermarkets and shopping malls with a similar message. “My 5-year-old didn’t want to lose his daddy,” read the flyers, which then proceeded to describe a “groundbreaking” new medicine – GVAX.

At the time, Cell Genesys was nowhere near bringing GVAX to market. It had just finished phase 2 clinical trials on a total of 65 patients. Lab results showed that GVAX might increase prostate cancer antibodies, but they did not show that the immune system was actually boosted in such a way as to better “fight off� cancer or improve survival. Phase 3 trials, which would determine whether GVAX actually improved the health of patients, had just begun.


But if you were an average Joe who read those flyers – or a wealthy Mary who received that solicitation in the mail – you’d be mighty convinced that Cell Genesys was the next big thing in cancer therapy. You might even be tempted to buy its stock.

* * * * * * * *

When Milken’s Prostate Cancer Foundation began distributing his fliers promoting GVAX, a number of hedge funds had accumulated large numbers of shares in Cell Genesys.

One of these was Millennium Management, the hedge fund that had been founded by the fellow who planned to murder Ivan Boesky when it seemed that Boesky might cooperate with the authorities in their case against Milken. Again, Millennium is one of those seven hedge funds that had the foresight to own put options in Dendreon back in March 2007, right before Dendreon’s treatment was unexpectedly scuttled by the FDA.

Another hedge fund with a big stake in Cell Genesys was Forest Investment Management, owned by Michael Boyd, the father of hedge fund shill Roddy Boyd, currently of Fortune Magazine.  Michael Boyd, remember, had previously been involved in two big ventures – one with a former Milken colleague from Drexel Burnham; the other with Santo Maggio, the convicted criminal CEO of Refco Securities.

Hedge fund Perceptive Advisors also held a moderately large stake in Cell Genesys. Recall that Perceptive was then run by Joseph Edelman, who was not only another one of those seven hedge fund managers who held put options in Dendreon, but was also simultaneously serving as a trader for Paramount Capital.

As you might recall, the vice president of Paramount Capital was a former employee of Milken crony Steve Cohen, who was also one of those seven hedge fund managers betting big against Dendreon. The owner of Paramount, of course, is Lindsay Rosenwald, who used to run the Mafia-controlled D.H. Blair with Milken’s former national sales manager, and controlled Cougar Biotechnology, another Dendreon competitor promoted by the Prostate Cancer Foundation.

Another big buyer of Cell Genesys shares was Mazama Capital, a hedge fund based in California. In December 2006, Mazama also owned 2.1 million shares of Dendreon. It dumped more than a million of those shares sometime before or immediately after the March advisory panel meeting, when it seemed certain that Dendreon would receive FDA approval.

Only one other hedge fund dumped similar quantities of Dendreon shares at that time. It was JL Advisors, which is controlled by the above-mentioned Steve Cohen. This dumping of shares contributed to the selling volume that was amplified by whoever was selling massive amounts of phantom stock in Dendreon.

Then there was Renaissance Technologies, which held 800,000 shares in Cell Genesys when Milken’s “philanthropy” began promoting the company.  The CFO of Renaissance is James Rowen, who was previously the chief financial officer of SAC Capital, the hedge fund run by the above-mentioned Steve Cohen, who is known to be maniacal about making sure that his former employees remain satellites of his trading empire.

Meanwhile, hedge funds Balyasny Asset Management and Visium Capital held a combined 12 million shares of Cell Genesys. Balyasny and Visium have overlapping ownership (Dmitry Balyasny is a partner in both hedge funds) though they don’t generally disclose that in their SEC filings.

Dimitry Balysasny is a close associate of Steve Cohen. He has employed some of those former SAC Capital traders and managers with whom Cohen maniacally maintains relationships. And he and Cohen have attacked the same companies.

As I mentioned, Balyasny was one of our seven hedge fund managers with large numbers of put options in Dendreon. I will return to him, because this enigmatic Russian might have more surprises in store for Dendreon.

* * * * * * * *

Three weeks after Milken’s Prostate Cancer Foundation began publicly promoting Cell Genesys’s virtually untested prostate cancer treatment, Cell Genesys announced that it had signed a gargantuan $320 million deal to develop and commercialize GVAX with Takeda Pharmaceutical, the Japanese biotech giant.

reported this deal dutifully and uncritically, making it sound like GVAX was the next big thing. The stock price soared, earning large profits for the Milken-network hedge funds that had invested in Cell Genesys.

But just as there was something fishy about the Milken-invested Novacea and its $500 million deal with Schering Plough, so too did the “$320 million” Cell Genesys deal deserve a hearty dose of skepticism.

For starters, only days before Cell Genesys announced the Takeda deal, Takeda had bought a company called Millennium Pharmaceuticals. Millennium had been transformed into Takeda Pharmaceutical Capital Ventures. It was Takeda Capital Ventures, not the Takeda parent company, that signed the deal with Cell Genesys.  In other words, it was almost certain that Millennium’s management, most of whom had been retained by Takeda Capital, orchestrated the whopping $320 million deal.

That was rather strange because Millennium had been founded by a man named Mark Levin. It was Levin who orchestrated Millennium’s merger with LeukoSite, the biotech company that belonged to Marty Peretz, the Boesky-Milken crony who founded And more important to this particular episode,  it was Levin who had founded Cell Genesys. He founded the company basically by investing in himself (just as Domain Associates had created the Milken-invested Novacea out of thin air).

So, assuming Levin still had influence over Millennium/Takeda, and assuming he was still invested in Cell Genesys, he had just orchestrated a deal to use other people’s money to invest $300 million in himself.

Or, at least Cell Genesys’s press release said that Takeda (which was, in fact, Millennium) was going to “pay Cell Genesys an upfront payment of $50 million and additional milestone payments totaling up to $270 million…Takeda [actually Millennium, now known as Takeda Capital Ventures] will pay Cell Genesys tiered, double-digit royalties based on net sales of GVAX immunotherapy for prostate cancer…”

Sounds good, doesn’t it? Sounds like those “net sales” are imminent, right? In fact, just as the Milken-invested Novacea’s $500 million deal was dependent on clinical trials showing good results, so too was Cell Genesys’s big deal with itself dependent on the company producing some evidence that it’s drug actually worked. The operative phrase in that press release was “milestone payments totaling up to $270 million.”

Of course, just three months later, Cell Genesys announced that it had halted its trials of GVAX after its Independent Data Monitoring Committee, in a “routine safety review meeting,� observed “an imbalance of deaths…�  In other words, GVAX was not helping patients. It was killing them. And, of course, the $270 million worth of “milestone payments� announced with so much fanfare were unceremoniously canceled.

Either before this announcement, or immediately after, the big investors in Cell Genesys – Mazama, Balyasny, Millennium, Perceptive Advisors – all dumped their shares. Given the big boost those shares got from Milken’s Prostate Cancer Foundation promotions and the giddy announcement that Cell Genesys would receive $330 million, we can assume that those investors made a nice profit on their sales, just as Milken’s ProQuest and affiliated funds made nice profits on their sales of Novacea.

It seems to me that Cell Genesys, like Novacea, was a sophisticated pump and dump scam, aided by Michael Milken’s  “philanthropic” outfit, the Prostate Cancer Foundation.

Which brings us to Cougar Biotechnology, the third Dendreon “competitor” promoted by Milken’s Prostate Cancer Foundation.  Cougar Biotechnology, as we know, was controlled by Lindsay Rosenwald, who used to help run D.H. Blair, the Mafia-linked pump-and-dump shop whose two vice chairman pled guilty to securities crimes, and whose president was Milken’s former national sales manager.

D.H. Blair was indicted on 173 counts of securities fraud, and it was notorious for pumping and dumping biotech companies with no real medicine. But who knows? Maybe Cougar has a genuine product. It is hard to say at the moment, and will remain that way for years to come, because its prostate cancer treatment remains virtually untested.

In any case, just last month, Cougar, no doubt aided by the Prostate Cancer Foundation’s vigorous endorsements, wangled a $1 billion deal to merge with Johnson & Johnson, so Rosenwald and friends did quite well on their investments.

Remember that while Milken’s Prostate Cancer Foundation was using unwitting donors’ money to promote Novacea, Cougar Biotechnology, and Cell Genesys, its top officials, and perhaps Milken himself, were actively seeking to derail Dendreon, the one company that actually had a promising treatment for prostate cancer. This was certainly to the benefit of the short sellers (some of whom were illegally naked short selling) and the buyers of put options who were betting big against Dendreon

Meanwhile, it should be noted that Cougar Biotechnology experienced almost no naked short selling, according to SEC “failures to deliver” data. The Milken-invested Novacea also experienced virtually zero naked short selling, even after it announced that its treatment was killing people. The same goes for Cell Genesys — relatively little naked short selling, even when its treatment flopped.

The miscreant party line is that hedge funds do not engage in naked short selling to manufacture phantom stock. The party line is that most “failures to deliver” are the result of mechanical “errors.” It’s funny how those “errors” tend to occur when miscreants in a certain network are short a company. It’s also funny that those “errors” don’t happen to companies in which Milken and his cronies are invested.

If only there were a pattern.

* * * * * * * *

This is part 13 of a 15-part series. The  story is published in its entirety at It is a story about the travails of just one small company, but it describes market machinations that have affected hundreds of other companies, and it contains a larger message for anyone concerned about the “deep capture” of our nation’s media and regulatory bodies.

Mark Mitchell is a reporter for He previously worked as an editorial page writer for The Wall Street Journal in Europe, a business correspondent for Time magazine in Asia, and as an assistant managing editor responsible for the Columbia Journalism Review’s online critique of business journalism. He holds an MBA from the Kellogg Graduate School of Management at Northwestern University. Email:

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