Nitromed issued its third quarter results yesterday morning and held an upbeat conference call that you can listen to here.

I assume relatively few of you do have money you can truly afford to lose, and so have no puts. But I also figure some of you may enjoy this as a spectator sport . . . a real life competition of sorts where we still don’t know who won.

Chronicling this saga may also help demonstrate how hard it is to beat the market (so most people shouldn’t try), but also demonstrate that there are times when the market prices stocks irrationally high or low, offering an opportunity for the rational investor willing and able to wait for sanity to return.

Sales of BiDil for the quarter were $1.1 million, versus the $10.7 million that UBS Securities has been steadfastly forecasting. (By ‘sales’ Nitromed means only the pills that wound up in patients’ hands, not all the ones in inventory, which can be returned to the company if they don’t sell.) Sales missed the UBS estimate by about 90%.

Earnings, meanwhile, had been estimated by UBS at a loss of 61 cents a share. It came in at a loss of $1.05. In a quarter where a little over $1 million came in in sales, $33.9 million went out in expenses.

So did the stock drop from Wednesday night’s $16.61 close to, say, $11?

Or to $7?

It closed up 56 cents at $17.17. (This is the part about how hard it is to beat the market.) It is now valued at $520 million.

More than 13,000 doctors have been visited by the Nitromed sales force, yet only about 4,000 prescriptions had been written as of the end of September. And maybe 30% of those prescriptions, if I got this right, were under the subsidized ‘voucher’ plan that won’t make the company any money.

Free BiDil samples have, however, been flying off the shelves.

The bulls on the stock hope that all those free samples will lead to paying customers. My guru agrees that sales are likely to grow considerably, but never to get anywhere near the $120 million or so annually the company would need just to break even.

My puts expire in December, March and June. It’s possible that, as the company’s losses mount, its stock will climb. (The SG Cowen analyst expects losses in 2005, 2006 and 2007 but a wonderfully profitable 2008.) That’s why you should only make this bet with money you can truly afford to lose. But it’s also possible that bulls will get discouraged and move on to greener pastures. I’m not selling my puts.


If it turns out that Scooter Libby lied, as charged, one has to wonder why. Dennis Kelleher has a theory, posted yesterday on TomPaine.com. In large part:

Why Would Libby Lie?
Dennis Kelleher
November 03, 2005
Dennis Kelleher is a legislative director for a Democratic senator. He was . . . a litigation partner at the law firm of Skadden, Arps, Slate, Meagher & Flom.

. . . If Libby lied, why would he? The prosecutor unknowingly answered that question at his press conference. He said, if the reporters testified when they were issued subpoenas in August 2004, ‘we would have been here [holding a press conference] in October 2004 instead of October 2005.’

October 2004 was a mere month before the presidential election on Nov. 2, 2004. Amazingly, in all the timelines of the leak investigations, there is no mention of the presidential election in November 2004 or that the basis for the war in Iraq was a key issue in that election.

Whether the charges in the indictment are true and whether Libby or anyone else is ever convicted, such a press conference on the eve of the presidential election in October 2004 would have dramatically affected that election. The reason that press conference was not held in October of 2004 is because the prosecutor had to waste a year fighting all the way to the Supreme Court to get information from reporters.

An October 2004 press conference summarizing the information in the indictment would have been explosive. If the prosecutor was in a position to know and disclose the information contained in the indictment in October 2004, it would have directly contradicted the White House’s categorical denial that Libby and Rove ‘were not involved’ in the disclosure of the agent’s identity.

At that point, on the eve of the November 2004 election, the key question would have been, what did President Bush know and when did he know it. The answers to those questions would not have mattered: If he knew, he was in the middle of blowing the cover of a CIA agent; if he didn’t know that his vice president and many of the most senior White House officials were involved in disclosing a CIA agent’s identity to reporters, it would have confirmed many people’s worst fears that he was dangerously detached.

Moreover, few would have believed that Libby, an extremely intelligent, careful lawyer with decades of experience, would have on his own and without the knowledge or approval of at least the vice president, if not the president, disclosed classified information and blown the cover of a CIA agent. Thus, the other key questions would have been: Who else knew, when did they know and how did they participate in blowing the CIA agent’s cover?

So, if Libby lied, he likely did so to conceal the involvement of Cheney and others, to prevent a pre-election scandal and to protect the Bush/Cheney re-election.

How did Libby’s alleged lies do this? The prosecutor unknowingly answered this question at his press conference as well. Libby isn’t alleged to have told a little lie here or there. He is alleged to have fabricated elaborate stories including false dialogue, phony feelings and reactions with several reporters. As the prosecutor said, ‘it was a compelling story that would lead the FBI to go away.’

Importantly, the FBI didn’t just ‘go away’ from Libby. They went ‘away’ from Cheney and others in the White House involved in getting the information on Wilson and his CIA agent wife and toward reporters. If Libby told the truth as alleged by the prosecutor, the FBI would have gone directly to the vice president’s office and the explosive information detailed above would have been uncovered.

Libby’s alleged ‘compelling’ lies likely also prevented the prosecutor from determining who, if anyone, broke the law by knowingly and intentionally disclosing the CIA agent’s identity. In short, Libby’s lies pointed the prosecutor ‘away’ from the possible or probable criminals, ‘away’ from the truth and toward reporters. This guaranteed months if not years of delays from battling over the First Amendment. That’s why it’s called obstruction of justice.

The prosecutor used a convoluted baseball metaphor to try to explain this. I propose a better one: You and three friends are standing on a street corner talking about doing something wrong. The discussion ends inconclusively and your friends leave, but you, with nothing to do, hang out at the corner alone. An hour later, your three friends come running by, looking scared and they duck into an alley behind you.

Two minutes later, cops come running over and ask if you saw three men running by. Without hesitating, you tell them that you did, that they almost knocked you over, that you twisted your knee, and that they ran down the street across the park from where you were standing. The cops go dashing off-in the wrong direction. Your friends sneak safely out of the alley and go to their homes and to work. A year later, the cops learn that you lied and try to head back in the right direction.

That’s obstruction of justice and that’s what Libby is accused of doing. That’s what it means to tell ‘a compelling story’ that leads ‘the FBI to go away.’


Clint Chaplin (and others): ‘You told us of the Buddhist who walked into a pizza parlor and said, ‘Make me one with everything.’ You forgot that when the pizza guy completed the transaction, the Buddhist asked for his change but was told that ‘Change must come from within.”


Elliot Raphaelson: ‘Even though there is a $300 limit per year on the 5% cash back card, you can obtain $600 by obtaining two cards, one for each spouse by applying separately.’

☞ And at no extra charge, you could get your photos on the cards.


Doug Jones: ‘Thanks for linking to that speech. It was worth reading.’

☞ A good way to spend 10 minutes of your weekend. Have a good one.


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