BY JOSEPH CHECKLER The day after Christmas is supposed to be a day to return bad gifts. For one hedge fund, it was a day for bad returns. San Francisco-based Eastbourne Capital Management probably wishes it could have returned before Christmas its 13.2 million shares of cancer drug company Telik Inc., which lost 71% of their value on Dec. 26, carving more than $150 million from the value of the fundâs position. The dive in Telik came after the company announced âextremely disappointingâ late-stage trial data for its cancer drug, Telcyta. The stock dove from $16.26 on Dec. 22 to $4.77 on Dec. 26, and it has dropped to $4.40 since. Eastbourne, whose chief investment officer Rick Barry didnât return several calls seeking comment, was one of three large institutional holders with a combined 55% of the companyâs shares, along with mutual funds Oppenheimer Funds and Fidelity Investments. The devastating news and subsequent stock drop illustrate the risk for hedge funds of investing so much capital in small-cap biotech companies. It also shows that while such companies are not often the target of short sellers because it is hard to ﬁnd shares to borrow, going short such a stock can be a huge win. Just ask the investors responsible for the 17.8 million shares of short interest, good for almost added that itâs never a good thing for cancer patients when a drug some thought was promising winds up failing. Eastbourne was making a bet that Telcyta, which was going through trials for lung and ovarian cancer, would have a positive outcome and take market share from such competitors as Genentech Inc. and OSI Pharmaceuticals Inc.âs Tarceva. But according to the short seller, Telcyta wasnât sufficiently different from other drugs and failed to impress during âsingle agentâ testing, the tests done with Telcyta as a singular treatment. He was also skeptical of the drug because he said that while a previous trial showed promise in short-term shrinking of ovarian tumors, it didnât appear that the drug would show promise in increasing survival rates. .