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Biotech Stock Mailbag: Vertex Pharma

Via Twitter, @dsalt writes, "Saw your piece on Opexa [Therapeutics] (OPXA) last September. Good writeup. What's your feeling towards them for this year? Next week good news?"

My ambivalent feeling about Opexa last September remains unchanged today. The company's experimental multiple sclerosis "vaccine" Tovaxin failed a phase IIb study in September 2008, sending the stock into the gutter. Since that setback, Opexa has tried to retrospectively mine the study looking for any smidgen of positive data. In late October 2008, Opexa claims to have found a subgroup of MS patients in the study who benefited from Tovaxin. Every few months or so, Opexa reiterates or elaborates upon this post-hoc (and ultimately useless) analysis of the negative Tovaxin data.

This week, Opexa announced that it was presenting more data from this phase II study of Tovaxin at the upcoming American Academy of Neurology (AAN) annual meeting. I guess we'll wait to see exactly what's in this data presentation, but just how different could the "new" Tovaxin data be from the "old" Tovaxin data presented at last year's AAN annual meeting?

Meantime, Opexa has long promised to begin a new phase II study of Tovaxin in MS patients, yet that study never seems to get underway. This old phase II study of Tovaxin is starting to smell a bit ripe from overuse, don't you think?


One more time... "BioZombie" writes, "I wanted to ask you something that seems to get (annoyingly) brought up on every message board for a stock you mention. Could you please address the masses regarding positions that your co-workers, friends, family, etc. may hold in stocks that you write about? It seems every time you write something negative (which does seem to be most of time, since MOST drugs, if history is any indicator, are doomed to fail) the boards scream that pals of yours must hold a short position in the underlying stock.

Does TheStreet or any person you know have prior knowledge of your writings, and if they do, are they able to take a position based on an article you are about to publish? I think if this were clearly answered (and I'm sure it has been in the past) the rest of us could limit some of the crybabies shouting conspiracy theory every time you write something negative."

I don't expect to convince the haters and conspiracy nuts, but once again, I point everyone to TheStreet's conflict of interest policy for editorial employees like myself. This is one of the most restrictive conflict of interest policies for financial reporters and editors you will find anywhere, and in fact, the policy was quite radical when instituted by Jim Cramer when he founded TheStreet a decade or so ago.

As a reporter/columnist for TheStreet, I cannot own any individual stocks, nor can I short any stocks. (The only permissible exception is owning stock in TheStreet.) I am prohibited from investing in investment partnerships like hedge funds. I am allowed to own mutual funds, which I do through my company-sponsored 401(k). (Although I'd be hard-pressed to tell you which mutual funds I own.)

The only compensation I receive for my work is a paycheck from TheStreet. I have no Swiss bank account. I have no friends, relatives or hedge funds holding my investments in secret trading accounts. Manila envelopes filled with cash are not being delivered to my door.

Lastly, I don't tell anyone about stories I'm writing in advance of publication. Now, let's be clear on this last point. A big part of my job involves speaking to a wide swath of sources, many of whom are professional investors -- including biotech hedge fund managers. This is a common practice for all financial journalists, and in fact, it would be impossible to do my job well without my Wall Street sources.

How do I know that these hedge fund sources aren't taking positions in stocks in advance of any story I write?

By never telling them when I plan on publishing a story, or even what information or viewpoint will be contained in the story. That's the best I can do and still perform my job. Let's be realistic here. Hedge fund managers aren't stupid, so if I call someone and we have a conversation about stock XYZ, Mr. Hedge Fund doesn't have to exert too much brainpower to deduce that I might be planning on writing about stock XYZ. But will he know what I plan on writing? No. Will he know when I plan to publish? No.

And let's not forget, I'm usually quizzing Mr. Hedge Fund about stock XYZ because I know he already has a long or short position. Most of my Wall Street sources have been in my Rolodex for years. I trust these people because their track record with me is golden. They know how to pick stocks, they know how to pick apart clinical data and they have finely honed bull#$%% detectors. If someone betrays that trust, he (or she) is gone. Lastly, I'm not naïve. I've been a business journalist for 20 years. I know that everyone has an angle, everyone talks his book, so I don't just blindly believe everything I'm told.


Finally, via Twitter @ywsr snarks, "Hi Adam, I am thinking of suing u for a gazillion bazillion dollars. I hurt my finger when I opened your tweet."

You want to sue me? Get in line, buster.

-- Reported by Adam Feuerstein in Boston.

Follow Adam Feuerstein on Twitter.

Adam Feuerstein writes regularly for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. Feuerstein appreciates your feedback; click here to send him an email.
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