Big Money Steers Clear of Biotech

There were some solid biotech companies presenting their stories at BIO CEO this year. And there have been some major success stories in the sector recently -- Pharmasset(VRUS) and Idenix Pharmaceuticals(IDIX) come to mind. But there are three biotech stocks in the red this year for every one in the green, according to a CapitalIQ screen that I ran.

Be careful. Hopefully, we'll soon get some good news in the biotech sector that will excite investors, and sentiment will turn sunny from sour.

Here, then, are some more of my notes and observations from the BIO CEO conference:

Middlebrook Pharmaceuticals(MBRK) is moving ahead with plans to sell the company.

ChemGenex(CXSP) is developing a drug for chronic myeloid leukemia, a form of blood cancer, that has the potential to be effective in patients with a genetic mutation that makes them resistant to current drugs used to treat the disease, most notably Novartis'(NVS) Gleevec. There is some question and concern that this CML patient subgroup may be very small, but the ChemGenex story sounded interesting and warrants more research.

Targacept(TRGT) reminded me that it, too, is a player in the race to develop a new Alzheimer's drug. Its AZD3480, partnered with AstraZeneca(AZN), will have phase II study data ready for release in the fourth quarter.

Auxilium Pharmaceuticals(AUXL) wasn't at BIO CEO, but I spoke to several institutional investors who really like the stock both for its marketed testosterone product Testim and for the experimental drug Xiaflex, which is in two phase III studies as a treatment for Dupuytren's contracture -- a condition that involves contracture of the joints in the hand caused by the shortening and thickening of ligaments. Data from the phase III studies are expected in the second quarter.

Arena Pharmaceuticals(ARNA) is getting ready for the March announcement of a 12-month cardio-toxicity safety check from a phase III trial of its obesity drug lorcaserin.

I want to thank Cell Therapeutics(CTIC) CEO Jim Bianco for publicly acknowledging my presence at his presentation Tuesday. Bianco puts on a good show, but I'm still unconvinced that he's going to be successful selling the blood cancer drug Zevalin. And as the Seattle Post-Intelligencer recently reported, Bianco is still up to his old money-spending tricks.

GenVec(GNVC) is still a show-me story. The company's gene therapy drug TNFerade is in a phase III study of pancreatic cancer patients, with an interim analysis planned for sometime in 2008. The company continues to be bullish, but that enthusiasm is based on earlier TNFerade data from just a handful of patients showing a trend toward improved survival that was not statistically significant. Color me highly skeptical.

There continues to be interest in Rigel Pharmaceuticals(RIGL) and its lead pipeline drug R788, especially as a treatment for rheumatoid arthritis after promising phase II data were announced late last year. The R788 program remains unpartnered, and investors are wondering how long that will last.

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