Life on the dole from D. Blech

The irritating thing about old saws is that they usually contain an unwelcome kernel of truth. Thus the warning not to put all of one's eggs in one basket comes a bit late to those early-stage companies that depended on New York financier David Blech as their single source of funds.

Some of these companies are finding out fast that they don't have a future.

One such company is Morphogenesis Inc., a Cranbury, N.J., company focused on cell differentiation and cell fate. The company was founded on the idea that, based on developmental biology, scientists could address diseases such as cancer, autoimmune disorders and type I diabetes.

"A lot of people think cancer is a blocked differentiation pathway," said President and CEO Jack Lief, who left his position as senior vice president at Cephalon Inc. to start Morphogenesis.

In January, the company signed a letter of intent with Hoffmann-La Roche to take Roche's calcitriol analog into development. Calcitriol is an active metabolite of vitamin D3 that has been shown in animal models to cause certain cancer cells to differentiate into normal cells.

Empty pockets

Based on that deal, Blech agreed to provide Morphogenesis with $3 million in the form of a loan convertible into equity. The money was provided on an as-needed basis, so "our cash balances were always minimal," Lief said.