What the heck was I thinking last year? $TELK? (palm to face) No thinking at all obviously. There was no fundamental reason for putting any money into $TELK. Of course, I could try to convince myself that it was undervalued and that it would run into data, but that would be irrational; perhaps, I can call a gimme and simply claim, brain fart. But, not more than one per year! At least it wasn’t a total loss. I bought shares at roughly $0.70/share during 3Q10 (which was after interim Phase II data (see below) was announced – an even sillier move, given the data) and (luckily) sold most (slap to cheek) at $1.00/share in February. Why, most, but not all? What was I clinging to? No idea, especially with the stock trading at $0.31/share at the close yesterday (9/8/11).

I fell off the boat on this one, so I will try reverse engineering a potential rationale for foolishly placing this bet. What did the company look like one year ago? At the end of 2Q10, $TELK had a market cap of $42 MM (53.5 MM shares outstanding (4/30/10, 7/30/10 10Qs) x $0.78/share, 6/30/10). They had $30.8M cash in the bank and were burning roughly $10 MM/Q, with management guiding cash through YE11. Not a good sign, as they would need to raise cash and dilute any current investor.

OK, let’s look at their assets – they had two in clinical development: Telcyta, which had already failed in Phase III trials, and Telintra, a small molecule glutathione analog inhibitor of glutathione S-transferase P1-1, with interim Phase II data released in June. Telintra was being developed for the treatment of blood disorders associated with low blood cell levels, such as neutropenia or anemia, and had selected myelodysplastic syndromes (MDS) as their first indication. Barring some crazy partnership for Telcyta to continue development, all eyes were/should have been on Telintra.

Thinking about the “joy” of interim data, I guess one could have hoped for a run into final Telintra Phase II data at ASH, but in retrospect, the interim data from June was simply not very exciting. And the final data confirmed this; to my eye, the data did not appear much better than Vidaza or Dacogen, when we look at “improved” response, not overall response.

Not a lot of positives above, but, could we have expected something over the following year? Well, they initiated a Phase II trial in Severe Chronic Neutropenia (SCN) pts during 2Q10 and during 4Q09, they initiated a 30-patient Phase I dose-ranging study in combination with Revlimid (lenalidomide) in patients with MDS. Not a pretty sight for one’s confidence going forward either.

At the end of 2Q11, $TELK still had a $42 MM market cap (54.0 MM shares outstanding (7/31/11) x $0.78/share, 6/30/11; a bit misleading, just pull up their chart). They reported $17.1M cash 2Q11, and burned $6-7 MM over the past 6-months; cash guidance is until 3Q12. $TELK had not yet raised cash, but was able to extend their runway by cutting operating expenses. Compared to 2010, they are now in a more precarious situation.

What about clinical progress? The Telintra Phase II trial in SCN patients was terminated 2Q11 due to a lack of patients. $TELK does expects data from the Phase I dose-ranging study in combination with Revlimid (lenalidomide) in patients with non 5q-deletion MDS by YE11. This is now our value driving event….P1 combination data.

During 2Q11, they also initiated a Phase II trial to evaluate Telintra in patients with lenalidomide refractory or resistant, deletion 5q myelodysplastic syndrome, or del 5q MDS, though according to ClinicalTrials.gov, the study is not yet open for enrollment.  Suffice it to say that they are testing a hypothesis based on a total of four patients from their previous Phase II trial in MDS patients and that our first look at the interim data analysis will not occur until early 2013.

Today, $TELK has a market cap of just $16.7 MM, at $0.31/share (9/8/11). Like many small biotechs, $TELK faces several challenges going forward. Most pressing is the need to raise capital, but at the current valuation, they will need to do it in tranches and tie them to the achievement of certain milestones. All this rides on the back of Phase I dose-ranging data. This is an ugly story. A brain fart – indeed.

What to expect:

10-18-11: Need to comply with NASDAQ listing requirement
YE11: Telintra, Phase I dose-ranging data in combination with Revlimid, non-deletion 5q low-to-intermediate risk MDS pts
YE12: Complete enrollment in an investigator sponsored trial with Telcyta in refractory mantle cell lymphoma pts
early13: Telintra, 1st Phase II interim analysis, Revlimid refractory/resistant pts; trial initiated Jun11, but has yet to enroll pts