The Burzynski Research Institute is a publicly traded company. I shit thee not, it is traded in an over-the-counter (OTC) market under the sobriquet of BZYR.OB. It’s what is termed a ‘penny stock’: individual shares cost less than a dollar. They are usually considered high-risk investments, in that you may make a killing if you’ve picked a winner: this is the legendary startup with a genuinely novel product (see: Facebook, Google, Amazon). More likely, you’ll lose your entire investment when the company folds or the bubble bursts. Oh, and the majority of the shares are not for trading: someone, usually the founder and his/her family, will have a controlling share that allows them to do exactly what they like with the company.

However, maybe the BRI is one of the smart picks. Let’s see. First, an extract from the blurb that goes with share price on the EDGAR listing:

As of May 1, 2011, there were approximately 2,000 holders of record of the Company’s Common Stock, as shown on the records of the Transfer Agent and Registrar of the Common Stock. Since many shares may be held by investors in nominee names, such as the name of their broker or their broker’s nominee, the number of record holders often bears little relationship to the number of beneficial owners of the Common Stock.

The Company has never paid cash dividends on its Common Stock and the Board of Directors intends to retain all of its earnings, if any, to finance the development and expansion of its business.

So, dividends are to be filed under YOU WISH. How about capital gains, then? The current share price is $0.32, significantly up on the $0.15 to $0.20 range I can see from January 2009, but less than the peak of $0.51 earlier this month. Over 5 years it’s been as low as $0.07. So it’s suddenly taken off: why? It can’t be the quarterly financials, they show a loss. They always show a loss.

Have a look at the published, audited results for the last three financial years, again on Yahoo! since they don’t provide an embed service and I suspect it would be both rude and dishonest to copy/paste this from their site. The first thing that strikes us is not that the Institute makes a hefty (for a small company) loss of around $5 million every year, but that it has no declared income. Nothing, nada, zilch, rien, nic, naught, the square root of bugger all. Not a fucking sausage.

What manner of WTFuckery is this?

Liquidity and Capital Resources

The Company’s operations have been funded entirely by Dr. Burzynski with funds generated from Dr. Burzynski’s medical practice. Effective March 1, 1997, the Company entered into a Research Funding Agreement with Dr. Burzynski (the “Research Funding Agreement”), pursuant to which the Company agreed to undertake all scientific research in connection with the development of new or improved Antineoplastons for the treatment of cancer and Dr. Burzynski agreed to fund the Company’s Antineoplaston research for that purpose…

Hmm. So, instead of the funds supplied by Stan The Man being included in income, to offset expenses, it’s going… where? Share capital. These are USA financials, so stockholders’ equity is at the bottom. Look at the share capital being increased to cover losses.

WHO AUDITED THIS BULLSHIT? You see, there are rules in accountancy. Principles, we call them. You could be forgiven for thinking otherwise, after all the grief a collection of money-grubbing merchant bankers (euphemism) has put the world through in the past few years, but principles there are. One of the first you learn is that you match expenses with income and capital with capital expenditure.

In other words, if the company is expensing its R&D, as it is here, it should have income coming in from somewhere. Increasing share capital is fair enough if you’re financing an asset, which in this case would be R&D expenditure on a drug/treatment/whatever which can reasonably be expected to be recouped later through sales, licensing fees and so on. But they’re not capitalising R&D expenditure, they’re writing it all off. Every last fucking penny is being binned. It is not going into the balance sheet as an asset expected to generate future revenue.

To me, as a professional accountant, this says quite clearly: the so-called ‘research’ being conducted at the Burzynski Research Institute is worthless and they know it.

Clearly, this situation is untenable. Money is being poured into a bottomless pit, until such time as either the miracle cure is proved to work and the patents… er no. The Institute has only about $4,000 of fixed assets, and that’s the net value after depreciation of the furniture. The Institute doesn’t even hold the patents on the drugs it’s supposed to be researching. +24 WTF points, new balls please.

Incidentally, just how solid is Dr Burzynski’s financial support and commitment to the Institute? I mean, apart from the tax relief which he probably gets from small company investment? Well, his legal commitment is purely short-term (maximum one year):

 In the event the research results in the approval of any additional patents for the treatment of cancer, Dr. Burzynski shall own all such patents, but shall license to the Company the patents based on the same terms, conditions and limitations as are in the current license between Dr. Burzynski and the Company…

The Company entered into a third amendment to the Research Funding Agreement, effective March 1, 2007, whereby the Company and Dr. Burzynski extended the term thereof until February 28, 2008, with an automatic renewal for an additional one-year term…

The Research Funding Agreement automatically terminates in the event that Dr. Burzynski owns less than fifty percent of the outstanding shares of the Company, or is removed as President and/or Chairman of the Board of the Company, unless Dr. Burzynski notifies the Company in writing of his intention to continue the agreement notwithstanding this automatic termination provision.

It goes on a bit more, but the upshot is that the loss to end Feb 2012 is expected to be another $5 million and that Burzynski’s assets and revenues should easily cover this loss. It will be interesting to see what happens when his case – well, I suppose it’s malpractice – comes up in April 2012. It would appear that his local medical board are seriously considering revoking his licence to practise medicine, and Stanislaw the Saviour has a lot to explain.

Looking at the facts, those foolish enough to put their money into BZYR.OB have already lost it. Quite probably Burzynski got tax relief on the money he put in, since he has the controlling interest, so he doesn’t care. He also has all the assets. Investors, you have just been well and truly shafted.

Incidentally, in case there was any lingering hope that the research might come up trumps, here’s someone who knows about this sort of thing to analyse the data available:

• Majikthyse – Clinical Trials for Sale
• The 21st Floor – Burzynski: naturals not in it
• Ministry of Truth – Texas Medical Board vs Burzynski

P.S. Ta ever so to arclight and Storm, who did some of the preliminary spadework.

UPDATE 30 nov 2011

This is what happens when I’m snowed under with information and dog-tired. I miss important stuff. We now know how at least some of the money enters the Burzynski circuit: donations are made in the form of personal cheques to Burzynski himself. This makes the question of why donations for research don’t appear in the Burzynski Research Institute’s income statement even more intriguing. In case the website gets changed, here’s what it says:

Donate to Clinical Trials & Research

The Burzynski Clinic accepts monetary dontations toward the continuation of the Clinical Trials and Research. You donate by check or Money Order payable to: S.R.Burzynski, M.D., Ph.D. Please note that donations are not tax deductible.

Address:

9432 Katy Freeway

Houston, Texas 77055

U.S.A.

I hope he at least gives a receipt. Not tax-deductible? Well no, as the Research Institute is not a registered charity. That may seem strange to you; it certainly does to me. I also question the ethics of channelling donations via a private individual’s bank account, instead of directly into the organisation they’re intended for. What assurance can donors have that their money is indeed used in research and not for any other purpose?

For those who’d like to make a donation to a real charity in the USA, here’s an excellent and informative article from USA Today: How to research a charity before donating your money

More on the legality and ethics of charging for clinical tests: Harpocrates Speaks: Paying to Volunteer.

Lastly: you never know, these forms might come in useful some day. I’ll just add them while I have the links. No use to me, as I’m not a US taxpayer, but I know some of you are:

• Internal Revenue Service Information Referral Form 3949A
• Application for Award for Original Information Form 211 (bounty for turning in tax fraudsters)

Related articles

• The Burzynski “Debate” (chapmancentral.co.uk)
• Two more tragic tales of Burzynski patients [Respectful Insolence] (scienceblogs.com)
• Burzynski: Toxic Treatment? (thetwentyfirstfloor.com)
• Is the FDA Protecting Burzynski? (majikthyse.wordpress.com)
• Stanislaw Burzynski: Kind-hearted strangers and a failure of medical journalism (scienceblogs.com)
• Is Stanislaw Burzynski a cunt? (chapmancentral.co.uk)
• Antineoplastons: Not gene targeted. Almost certainly not curative. (thetwentyfirstfloor.com)