Feuerstein's Biotech Mailbag
BOSTON -- Thanks for returning to the Biotech Mailbag. Let's get right to your emails. This week:Xoma (XOMA), Vanda Pharmaceuticals (VNDA),
The first email is from David R., who writes, "Has Xoma ever earned a cent? I don't think so. It's amazing that such a nothing company can survive so long." Yes, Xoma has earned a cent. In fact, the company posted a profit of $21.8 million, or 16 a share, in the third quarter. But I think I know where David is going with his question. Yes, Xoma eked out a profit last quarter, but the company is expected to lose money for the full year, and its accumulated deficit was $730 million as of the end of the third quarter. So, Xoma shouldn't really be thought of as a profitable biotech company just yet. But then, red ink flows like water in Biotechland, so Xoma is no different from most. I wouldn't necessarily harp on the company for this. I pretty much laid out the Xoma investment story in a column at the end of November, and not much has changed. The speculation that Xoma would put itself up for sale has died down. From what I hear, management seems unable or unwilling to sell the company at this point. This despite the fact that new CEO Steven Engle's employment contract appears to give him an incentive to find a buyer now that 2007 is behind us. If you want more detail, read the company's 8-K filed last Aug. 7. Xoma filed a $150 million shelf at the end of December, so that, plus dimming odds on a near-term takeout, has weighed on the stock, which is back under $3. The next best bet for a Xoma move is data from XOMA 052, one of the company's lead pipeline drugs, expected in the spring. XOMA 052 is a monoclonal antibody that targets IL-1 beta, which is believed to play a role in diabetes and inflammatory/autoimmune diseases like rheumatoid arthritis. Xoma is conducting two phase I studies of XOMA 052 in Type 2 diabetes patients. Obviously, there is limited information that will come from early stage studies like these, but if Xoma can show positive proof of concept with the drug, the hope is that investors (and potential partners) get excited. Of course, don't forget about that shelf. If the stock moves higher, don't be surprised to see Xoma raise money.
Kris B. emails to ask about Vanda: "I would like to know your analysis of Vanda Pharmaceuticals. I am a realist and think iloperidone gets an approvable letter later this year and forces Vanda to run another trial examining the QTc issue. However, I am long at this current price, $5.75, and left wondering why there is very little value placed on two successful phase III drugs and over $3.50 a share in cash." Vanda is pitching iloperidone as safer and better tolerated than currently used schizophrenia drugs like Risperdal or Geodon. But that's not borne out, necessarily, in the phase III data presented last month. Iloperidone looks like a me-too drug on efficacy, with a mixed-to-worse side effect profile compared with currently marketed schizophrenia drugs. It may cause fewer movement disorders (a plus), but more weight gain and a worse metabolic profile, which puts patients at risk for diabetes (not good). I don't think the QTc (irregular heartbeat) issue is resolved, either. Kris succinctly articulates the bull argument on Vanda right now, which is that the stock is cheap and expectations are low, so owning Vanda seems like a low-risk bet. It closed the week at $5.27.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV