The 66 Million Dollar Men
In our May issue we presented you an exceptional piece of reporting, which originally appeared in the Pittsburgh Post-Gazette. The story, about Biocontrol Technology, Inc., was written by Gazette Staff Writer Patricia Sabatini, who has been following the company for quite a while now. DIABETES HEALTH has also been watching Biocontrol, and as I look through our stories and those run by the Post-Gazette I am hit with one notion: It must be nice to make $700,000 a year and not even have to deal with the pesky task of actually producing a product.
This is exactly what Fred E. Cooper and David Purdy seem to do-at great expense to some people with diabetes who have invested in their company, hoping one day they may never prick a finger again. Biocontrol continually targets people with diabetes for research and development capital, knowing we are a community desperate for an alternative. I talked to one man who had invested his child's entire college fund into Biocontrol, and was very worried. Well, he should be. According to Patricia's reports, chances are his child's college money went toward a nice home and a Cadillac for Fred E. Cooper. I am just glad that Patricia's story finally tells the truth about Biocontrol.
Of course that's not how Biocontrol sees it. Our poor fax machine has been pushed just about to its limit by Biocontrol's damage control since the original Post-Gazette story came out on Sunday March 24. The company is steadfastly assuring the public that everything is going to be OK, even as the walls come crumbling down around them.
The immediate response was in the form of a five-page letter by Fred E. Cooper. The letter was addressed to the general public explaining that even though Biocontrol's sales are less than his salary, he is a good businessman and deserves all that money. Fred also asked investors to keep in mind how difficult it is to raise and spend more than $66 million dollars without having a product to market. Poor Fred.
Well, it looks like Fred's troub-les are just beginning. In light of the illegal stock sales revealed by Patricia, the Pennsylvania Securities Commission (PSC) has begun an investigation into Biocontrol. The company has been asked to give a complete list of shareholders, several of whom have been approached by the PSC, according to follow-up stories in the Post-Gazette. If Biocontrol or its subsidiary Diasense are caught selling stock illegally, the companies may be forced to refund the money, and could have their stock offerings barred or revoked and face a criminal investigation.
To make things worse, it doesn't look like Fred and his pals will have their product approved for sale anytime soon. The FDA has asked Biocontrol to resubmit their application for approval. It seems an FDA advisory board was not too impressed that in trials, the Diasensor could only "successfully" get readings on 8 out of 85 test patients. Most people could guess their blood sugar better than that. One member of the panel, Dr. Julio Santiago, a professor at the Washington School of Medicine, was quoted in the Post-Gazette saying: "It looks to me like the machine is producing the same numbers regardless of the glucose level."
Biocontrol insists dismissal of their original marketing application is no setback, and they plan to resubmit their application in a few months. The first application was filed in January 1994.
Biocontrol's plans to forgo the U.S. market for other less restrictive markets may also be in jeopardy. The company has been taking orders for the Diasensor in England since 1994, but England's equivalent of the FDA said last month that they would not approve the Diasensor if the FDA did not. It also appears that the European Union will not approve the Diasensor as long as the FDA still has problems with it.
Biocontrol held an open house, as well as its first investor meeting in a long time, last month, trying to quell the public's growing concerns with the company. Both meetings had uniformed police to keep out any people who were judged to be too "adversarial." This included Post-Gazette reporters and disgruntled shareholders.
As Biocontrol continues to hemorrhage money ($29 million last year alone), they need to continually attract more investors. At the shareholders' meeting, Biocontrol asked investors to approve an increase in the number of authorized common shares from 40 to 60 million. Biocontrol, it seems, is attempting to build 30 test Diasensors and needs money for production. The investors approved the share increase by over 90%, according to Biocontrol's PR firm.
It's good money after bad, and neither kind hurts Fred's wallet.Click Here To View Or Post Comments