Selling pressure is continuing on stocks associated with D. Blech &Co., the New York investment firm that suspended operations as amarket maker Thursday because it failed to meet capital requirements.Scott Weisman, director of investment banking for Josephthal, Lyon &Ross, told BioWorld Tuesday that his company has received regulatoryapproval to purchase the account and sales force of D. Blech. "Thebrokerage accounts have all been transferred, and we're in the processof trying to get the brokers registered with Josephthal," he said.Despite the changeover, stocks in D. Blech's portfolio, 12 of which losta total of $168 million in market capitalization on Thursday, continued,for the most part, their downslide in unusually heavy trading. (See thechart at right.)David Stone, a managing director at Cowen & Co., said one of threepossibilities is likely responsible for the selling pressure: Blech isselling its shares; someone else is selling shares before Blech does; orothers are selling short in front of an anticipated excess supply."How rapidly that tails off will vary from company to company," Stonesaid. "The stock for each company will need some catalyst if its goingto turn itself around. Negative trading patterns can become a self-fulfilling cycle. It may take some weeks to months to see this situationturn itself around."In the past year, D. Blech has underwritten at least 12 initial publicofferings, including those of Texas Biotechnology Corp., IncytePharmaceuticals Inc., Microprobe Corp., Advanced Surgical Inc.,GeneMedicine Inc., Guilford Pharmaceuticals Inc., La JollaPharmaceutical Co., LXR Biotechnology Inc., Ariad PharmaceuticalsInc., HemaSure Inc., BioSepra Inc. and Procept Inc. Blech acted as aventure capital investor is some of the offerings, and took variousstakes in other companies, including Ecogen Inc., one of the mostheavily traded NASDAQ stocks since Thursday.In 12 Blech-associated companies on Tuesday, four stocks wereunchanged, one went up and seven lost ground. All have lostsignificant market value since Thursday, with six of the 12 losing 50percent or more of their stock price."It's painful and distracting for management and employees to watchthe stock trade at what they believe are unreasonable low levels," Stonesaid.What the companies have in common is that a lot of their stock hascome up for sale, and the price has dropped. But Stone said eachcompany's cash position will go a long way toward determining howit's able to cope with the downturn.Companies with cash to last a few years can run the business as usual,and let the stock catch up later, he said. But companies that need toraise money, or that are using their stock as part of negotiatingtransactions, will be at a disadvantage while their stock is trading low.Weisman said Josephthal is looking at companies that were in D.Blech's financing pipeline, but that it's too early to say what will result.He said Josephthal "has not had long discussions with [David Blech],"and "it's too early to get a handle on what he intends to do."Editor's note: For more on the Blech story, see the daily issues ofBioWorld Today, Sept. 23, 26 and the Special News Bulletin issuedmidday on Sept. 23. nBlech-Associated StocksCompany Symbol Close Close Close % Change 9/21 9/23 9/27 From 9/21Ariad ARIA 2.313 2.625 1.937 -16BioSepra Inc BSEP 5.125 3.000 2.500 -51Ecogen EECN 5.874 4.312 4.000 -32Guilford Pharm GLFD 7.656 4.125 3.000 -61GeneMedecine GMED 7.875 4.437 3.750 -52Hemasure HMSR 7.500 4.000 3.250 -57La Jolla Pharm LJPC 4.250 2.875 2.500 -41LXR Biotech LXR 2.875 2.062 1.625 -43Procept Inc PRCT 5.062 3.750 3.375 -33Texas Biotech TXB E 4.187 2.875 2.125 -49MicroProbe MPRO 1.375 0.625 0.687 -50Pharmos PARS 4.500 1.937 1.562 -65Average -49

-- Jim Shrine

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